Customers at Joe’s Office Supply Store demand an average of 6000 desks per year. Each time an order is placed, an ordering cost of $300 is incurred. The annual holding cost for a single desk is 25% of...

Customers at Joe’s Office Supply Store demand an average of 6000 desks per year. Each time an order is placed, an ordering cost of $300 is incurred. The annual holding cost for a single desk is 25% of the $200 cost of a desk. One week elapses between the placement of an order and the arrival of the order. In parts a to d, assume that no shortages are allowed.

a. Each time an order is placed, how many desks should be ordered?

b. How many orders should be placed each year?

c. Determine the total annual costs (excluding purchasing costs) of meeting the customers’ demands for desks.


d. If the lead time is 5 weeks, what is the reorder point? (One year equals 52 weeks.)


e. How do the answers to parts a and b change if shortages are allowed and a cost of $80 is incurred if Joe’s is short one desk for one year?