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Southern Office Supplies Inc.

Southern Office Supplies Inc. distributes office supplies to customers in the Southeast. One popular SKU is laser printer paper. Ordering costs are $51.00 per order. One ream of paper costs $3.80, and Southern uses a 25 percent annual inventory-holding cost rate. The average annual demand is 15,500 reams and historical data shows that the standard deviation of weekly demand is about 72. The lead time from the manufacturer is 3 weeks. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.

Questions

1. What is the minimum-cost economic order quantity?

2. What is the annual ordering cost for the EOQ? Use the rounded EOQ value in your calculations

3. What is the annual inventory holding cost for the EOQ?

4. What is the total annual cost for the EOQ? Use the rounded EOQ value in your calculations?

5. Assuming that there are 52 weeks in a year what is the average demand during the lead time?

6. What is the standard deviation of demand during the lead time?

7. What is the safety stock with a 99 percent service level?

8. What is the reorder point with safety stock?


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answered by: Subrahmanyam golla
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