Weekly demand (d) = 94 units

Annual demand (D) = d x number of weeks per year = 94 x 52 = 48888 units

Ordering cost (S) = $720 per order

Holding cost (H) = $23

Lead time (L) = 3 weeks

Standard deviation of weekly demand (sigmad) = 30 units

At 82% service level value of Z = 0.92

a) EOQ = Sqrt of (2DS / H)

= sqrt of [(2 x 4888 x 720) / 23)]

= 553.20 units

b) Safety stock = Z x sigma d x sqrt of L

= 0.92 x 30 x sqrt of 3

= 0.92 x 30 x 1.73

= 47.75 units

C) Reorder point = d x L + Safety stock

= 94 x 3 + 47.75

= 282 + 47.75

= 329.75 units

d) If the order quantity (Q) = 300 units

Annual Ordering cost = (D/Q) S = (4888/300)720 = $11731.2

Annual holding cost = (Q/2)H = (300/2)23 = $3450

Total annual cost = Ordering cost + Holding cost

= $11731.2 + $3450

= $15181.2

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