**Answer:**

- Economic order quantity= 1406 units
- Safety Stock= 630 units
- Reorder Point= 14130 units

**Explanation:**

Given Demand D= 78,000units/year

Ordering cost S = $38.00/order

Holding cost H = $3.00unit/year

Average lead time = 9 weeks

Standard deviation of weekly demand = 120 units

a) **Economic order quantity:**

EOQ = \sqrt{(2*D*S)/H}

EOQ = \sqrt{(2*78000*38)/3}

1405.7 = <u>**1406 Units**</u>

b)<u>**
Safety Stock:**</u>

Weekly demand = 78000/52 =1500 units

Standard deviation of weekly demand = 120 units

Lead time is 9 weeks

Using the normsinv() in excel the Z value for the desired 96% service level is 1.75

Safety stock = z\sigma _{d}\sqrt{L}

= 1.75*120*\sqrt{9}

= **630 units
**

**Reorder poin**t = average lead time demand + safety stock

= lead time * weekly demand + saftey stock

= 9*1500 + 630

= 13500 + 630

Reorder point = **14130**