The maternity ward of a hospital sends one baby blanket home with each newborn baby. The following information is available for the baby blankets:

a. As the new maternity ward manager, you decide to improve the current ordering methods used for items which are stocked in the maternity ward. Calculate the economic order quantity for baby blankets.

b. Baby blankets are currently ordered in quantities of 200. How much would the maternity ward save in total annual relevant costs by changing to the EOQ?

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Demand = 80 blankets/week Standard deviation in weekly demand = seven blankets Desired cycle service level = 96 percent Delivery lead time (L) = two weeks (delivery of the blankets, not the babies!) Annual holding cost = $2.00 Ordering cost = $8.00/order Cost of one blanket = $6.00 The hospital is open 52 weeks each year.