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10.* High Tech, Inc. is a virtual store that stocks a variety of calculators in their warehouse. Customer orders are placed, the order is picked and packaged, and then shipped to the customer. A fixed order quantity inventory control system (FQS) helps monitor and control these SKUs. The following information is for one of the calculators that they stock, sell, and ship.Average demand 12.5 calculators per weekLead time 3 weeksOrder cost $20/orderUnit cost$8.00Carrying charge rate0.15Number of weeks 52 weeks per yearStandard deviation of weekly demand3.75 calculatorsSKU service level90 percentCurrent on-hand inventory35 calculatorsScheduled receipts20 calculators
OM4 C12 IMBackorders2 calculatorsa.What is the Economic Order Quantity?b.What is the total annual order and inventory-holding costs for the EOQ?c.What is the reorder point without safety stock?d.What is the reorder point with safety stock?(Comment: You may want to review how you looked up the Z = 1.28 using Appendix A)Most of these calculations can also be found using the FQS Safety Stock Excel template:e.Based on the previous information, should a fixed order quantity be placed, and if so, for how many calculators?
OM4 C12 IM11.*Crew Soccer Shoes Company is considering a change of their current inventory control system for soccer shoes. The information regarding the shoes is given below.Average demand = 200 pairs/weekLead time = 3 weeksOrder cost = $65/orderUnit cost = $20Carrying charge rate = 0.20Desired service level = 95%Standard deviation of weekly demand = 50Number of weeks per year = 52The company decides to use a fixed order quantity system. What is the economic order quantity? What should be the reorder point be to have a 95% service level? Explain how the system will operate.