A discount appliance store sells iPhones. The store purchases iPhones at a price of $95 per...

A discount appliance store sells iPhones. The store purchases iPhones at a price of $95 per unit. The following information applies to this product.
Demand = 20 units/day
Order cost = $56/order
Annual holding cost = 25% of purchase price
Desired cycle-service level = 90% (z=1.28)
Lead time = 10 days
Standard deviation of daily demand = 4 units
Current on-hand inventory 220 units, with no open orders or back orders
The store operates 52 weeks per year, 6 days per week. It has a continuous inventory review system.

What is the annual cost saved by shifting from the 500-unit lot size to the EOQ?

Suppose that the discount appliance store uses a P system instead of a Q system. They order inventory every 12 days.

What should T be?

How much more safety stock (than with a Q system) is needed?

It is time for the periodic review. How much should be ordered?

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Expert Solution

ekkarill92 answered 1 year ago

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