Consider the following inventory problem: The Average Monthly Demand is 400. The

ID: 452873 • Letter: C

Question

Consider the following inventory problem:

The Average Monthly Demand is 400.

The Standard Deviation of Monthly Demand is 45.

The Lead Time from order placement to order receipt is 0.75 months.

The desired service level is 95%.

The Set Up Cost (or Cost per Order) is $150 per order.

The Holding Cost is $4 per item per year.

If ordering the Economic Order Quantity (EOQ) and maintaining safety stock, what is the minimum annual ordering and holding costs?

A) 1200 B) 1456.41 C) 2400 D) 2656.41 E) 7323.76

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