TV Galore is a new specialty store that sells television sets, video games, and other television-related products. A new Japanese-manufactured game sells cost $400. Because such games have a short life cycle and can be considered somewhat perishable, inventory-carrying cost is high. It is at an annual rate of 25 percent of SKU value. Ordering costs are estimated to be $80 per order. Annual demand is forecast at 900 units next year. The standard deviation of daily demand is seven units, the desired service level is 95 percent, the lead time is five weeks, and assume 52 weeks per year.

a. Set up a fixed-order-quantity system computing the EOQ, reorder point with safety stock, and total order and inventory carrying costs.

b. Setup a fixed-period system computing the review period (T) and the replenishment level

(M) with safety stock. Round the review period to the next highest number.

c. How much more does it cost to carrying inventory in a FPS than a FQS using only dL versus d(T 1 L) and safety stock 5 zsL versus zsT1L?