A Company Begins a Review of Ordering Policies for Its Continuous Review System
A company begins a review of ordering policies for its continuous review system by checking the…
A company begins a review of ordering policies for its continuous review system by checking the current policies for a sample of SKUs. Following are the characteristics of one item.
Demand 
= 64 units/week 1Assume 52 weeks per year2
Ordering or setup cost 
= $50/order
Holding cost 
= $13/unit/year
Lead time 
= 2 weeks
Standard deviation of weekly demand = 12 units
Cycle-service level = 88 percent
a. What is the EOQ for this item?
b. What is the desired safety stock?
c. What is the reorder point?
d. What are the cost implications if the current policy for this item is 
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