Peterson Enterprises Uses a Fixed Order Quantity Inventory Control System

question 31

Essay

Peterson Enterprises uses a fixed order quantity inventory control system.The firm operates 50 weeks per year and has the following characteristics for an item:
Demand = 50,000 units/year
Ordering cost = $35/order
Holding cost = $2/unit/year
Lead time = 3 weeks
Standard deviation in weekly demand = 125 units
a.What is the EOQ for this item?
b.If Peterson wishes to provide a 90 percent cycle-service level, what is the reorder point with safety stock?

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