Question: Current Ordering Model

A wholesale distributor stocks and sells low flow toilets to contractors for use in commercial office buildings. The estimated annual demand for the toilets is 15,000 units. The estimated average demand per day is 40 units. The purchase cost from the toilet manufacturer is $125.00 per unit. The lead time for a new order is 7 days. The ordering cost is $250.00 per order. The average holding cost per unit per year is $5.00. The distributor has traditionally ordered 560 units each time they placed an order. Answer questions 1 through 3 based upon the preceding information regarding the distributor’s current ordering model.

? What is the average dollar value of inventory based upon ordering 560 units each tiMean order is placed?

? What is the total annual cost (Purchase Cost + Ordering Cost + Holding Cost) based upon ordering 560 units each tiMean order is placed?

? What is the reorder point?