1. A manager receives a forecast for next year. Demand is projected to be 600 units for the first half of the year and 900 units for the second half. The monthly holding cost is $2 per unit, and it costs an estimated $55 to process an order.

1. Assuming that the monthly demand will be level during each six month periods covered, (e.g., 100 per month for each of the six months) determine an order size that will minimize total cost that can be used for each of the six month period.
2. Why is it important to be able to assume that demand will be level during each six month period?
3. If the vendor is willing to offer the manager the discount of $10 per order for ordering in multiple of 50 units, would you advise the manager to take advantage of the offer in either period? If so, what order size would you recommend?

2. MFA uses an ROP approach to restocking her components. Lead time is six days. Usage of the component during lead time is normally distributed with a mean of 42 kg and a standard deviation of 4 kg. When should the raw components be reordered if the acceptable risk of a stockout is 3%?

Pls answer this two problems. Thank you.