Inventory Management

Inventory Management Problems Problem 1 The most popular car for a popular local car dealership is a 4-wheel drive, sport utility vehicle. The new year models are available and the dealer must determine how many of these vehicles to order from the car manufacturer. Demand is estimated at 160 vehicles per year. The annual carrying cost is $650 per car and the ordering cost is $700 per order. A) Determine the optimal order size, total annual inventory cost and the order cycle time. Show your calculations. B) This particular car manufacturer has offered the following price discount schedule: Order Size 0-99 100-149 150+ Price $16,000 $15,700 $15,500 What is the optimal order size and total cost? Show your calculations. Problem 2 Daily demand for a product is normally distributed with a mean of 200 units and a standard deviation of 30 units. The firm currently uses a reorder point system. The lead time is 4 days. A) What safety stock provides a 90 percent service level? Show your calculations. B) What safety stock provides a 99 percent service level? Show your calculations.