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A company begins a review of ordering policies for a sample of items. The company operates...

A company begins a review of ordering policies for a sample of items. The company operates 52 weeks a year. The following are the characteristics of one item:

Demand = 3,380 units/year

Ordering cost = $50/order

Holding cost = $13/unit/year

Lead time = 3 weeks

Standard deviation of weekly demand = 16 units

Desired cycle service level = 98%

a) Calculate EOQ and use it to find the order interval (OI). Round the number to the nearest integer week. Hint: D/Q will give you the # of orders to place in a year; order interval = review interval.

b) Suppose the company just finished a periodic review and found 20 units of on-hand inventory, how many units should be ordered (i.e. amount to order)?

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