Determine the total annual inventory cost for product Y. Include the item cost in your calculations. (Assume 52 weeks of operation per year.)
A company produces item Y, and uses the basic EOQ model for managing its inventory. Lead time to obtain item Y is two weeks. Demand is normally distributed with a mean of 400 units per week and a standard deviation of 40 units per week. The desired service level is 98.5%. The ordering cost is $20, and carrying cost is 20% of the items cost, which is $10.
Answer: $209,290
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