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Thomas Kratzer is the purchasing manager for the headquarters of a large insurance company chain...

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Accounting

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Thomas Kratzer is the purchasing manager for the headquarters of a large insurance company chain with a central inventory operation. Thomas's fastest-moving inventory item has a demand of 6,000 units per year. The cost of each unit is $100, and the inventory carrying cost is $10 per unit per year. The average ordering cost is $30 per order. It takes about 5 days for an order to arrive, and the demand for 1 week is 120 units. (This is a corporate operation, and there are 250 working days per year.) a) What is the EOQ? b) What is the average inventory if the EOQ is used? c) What is the optimal number of orders per year? d) What is the optimal number of days in between any two orders? e) What is the annual cost of ordering and holding inventory? f) What is the total annual inventory cost, including the cost of the 6,000 units? e) What is the safety stock needed to attain a 1% risk of stockout during lead time? f) What is the annual holding cost of maintaining the level of safety stock needed to support a 1\% risk? g) If management specified that a 2% risk of stockout during lead time is acceptable, would the safety stock holding costs decrease or increase

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