Brenda opens a pool and spa store in a lively shopping mall and finds

Brenda opens a pool and spa store in a lively shopping mall and finds business to be booming, but

she often stocks out of key items customers want. She decides to experiment with inventory

control methods such as using a fixed order quantity (FQS) and/or fixed order period (FPS)

systems. The 28-ounce bottle of Super Algaecide (SA) is a high margin stock keeping unit

(SKU), but it stocks out frequently. Ten SA bottles come in each box, and she orders boxes from

a vendor 160 miles away. Brenda is busy running the store and seldom has time to review store

inventory status and order the right quantity at the right time. She collects the following data with

respect to these SA sales.

 

Demand = 10 boxes per week Store operates 50 weeks/year

 

Order cost = $40/order Lead time = 3 weeks

 

Item cost = $80/box Std. deviation in weekly demand = 6

 

Inventory-holding cost = 15% per year Service level = 95% (Z=1.645)

 

A. The Economic Order Quantity (EOQ) rounded to the next highest number is:

 

B. The reorder point point for Super Algaecide (SA) With safety Stock rounded to the

next highest number is:

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