A large hospital uses a certain intravenous solution that it maintains in inventory. Pertinent data about this item are as follows:

a. Design a reorder point system of control for this item.
b. Design a periodic review system of control for this item.
c. Do you think the in-stock probability is correctly specified to minimize costs? Appraise with reference to the reorder point system design.

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Forecasted daily usage Forecast error std. devb 50 units 15 units 7 days 2 days 30% Average lead time Lead time std. dev.b Annual carrying cost Procurement cost per order$50 Stockout cost Product value $15 per unit $45 per unit In-stock probabilitys 365 days per year Normally distributed During the lead time or during the order interval plus lead time, depending on the inventory control design 85%