Appliance for Less is a local appliance store. It costs this store $18.67 per un

Question

Appliance for Less is a local appliance store. It costs this store $18.67 per unit annually for storage, insurance, etc, to hold microwave in their inventory. Sales this year are anticipated to be 708 units. Each order costs $91. The company is using Economic Order Quantity model in placing the orders t takes approximately 3 day's) to receive an order after it has been placed If the store insists on a 1 day's safety stock (assume 365-days a year) what should the inventory level be when a new ordet is placed? Round the onswer to the whote number Your Answer Answer Page 7 of S en Page Save Responses Go to s.bmit Qulz

Explanation / Answer

Annual demand = 708 units

Number of days in a year = 365 days

Daily demand = Annual demand /number of days in a year

= 706/365

= 1.93 or rounded to 2 units

Lead time = 3 days

Safety stock for 1 day = demand for 1 day = 2 units

Reorder point = Daily demand x Lead time + Safety stock

= 2 x 3 + 2

= 6 + 2

= 8 units

So new order should be placed when the inventory level reaches 8 units

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