Refer to the data given in Problem 15.35 for Pally Communications Company prior to the JIT purchasing agreement. The lead time required to receive an order of XL-20 is one month.

Required:

1. Assuming stable usage of XL-20 each month, determine the reorder point for XL-20.

2. Draw a graph showing the usage, lead time and reorder point for XL-20.

3. Suppose that monthly usage of XL-20 fluctuates between 300 and 500 canisters, although arms' demand remains constant at 4800 canisters. What level of safety stock should the materials and parts manager keep on hand for XL-20? What is the new reorder point for the chemical?

4. Explain the types of changes that Kaplan may have negotiated with the supplier to reduce the cost of placing an order from $300 to just $60.