Problem-Solving- Operations Management (Excel)

Use Excel to create a spreadsheet and answer the questions at the end of the directions below. The mathematical responses must be calculated in Excel. The written response to question 5 must be answered in the Excel spreadsheet as well.

High Tech Inc. is a virtual store that stocks a variety of calculators in its warehouse. Customer orders are placed, the orders are picked and packaged, and then orders are shipped to the customers. A fixed-order quantity inventory control system (FQS) helps monitor and control these Stock Keeping Units (SKUs). The following information is for one of the calculators that High Tech stocks, sells, and ships.

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Average Demand 12.5 calculators per week
Lead time 3 weeks
Order cost $20/order
Unit cost $8.00
Carrying charge rate 0.25
Number of weeks 52 weeks per year
Standard deviation of weekly demand 3.75 calculators
SKU service level 95 percent
Current on-hand inventory 35 calculators
Backorders 2 calculators

1. What is the economic order quantity?
2. What are the total annual order and inventory holding costs for EOQ?
3. What is the reorder point without safety stock?
4. What is the reorder point with safety stock?
5. Based on the previous information, should a fixed order quantity be placed, and if so, for how many calculators?

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