A subcontracting firm Gamma Pharmaceuticals Ltd. located in Western India dealing with generic medicines operates 50 weeks per year. The following information is available regarding the major ingredient used for the medicine:
Weekly Demand= 60 units
Standard deviation of weekly demand = 9 units
Ordering costs (Co) = Rs. 64/ order
Holding costs (Ch) = Rs.40/unit/year
Cycle-service level = 90% (z-value = 1.28)
Lead time = 2 weeks
Number of weeks per year = 50 weeks
d) Using the fixed order quantity system to control inventory, calculate the EOQ
e) Compute the reorder point and state the order decision rule
f) Compute the total variable cost of inventory.
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