1. A purchasing agent for a particular type of silicon wafer used in the production of semiconductors must decide among three sources. Source A will sell silicon wafers for $2.50 per wafer, for an order fewer than 3000. Source B will sell the wafers for $2.40 each but will not consider an order for fewer than 3,000 wafers, and source C will sell the wafers for $2.30 each but will not accept an order for fewer than 4,000 wafers. Assume an order setup cost of $50 and an annual requirement of 20,000 wafers. Assume that the holding cost is calculated as 20%of the purchase price per unit on an annual basis. Which source should be used, and what is the size of the standing order?

2. Kroft foods makes cheese to supply to stores in its area. The dairy can make 350 pounds of cheese per day, and the demand of area stores is 205 pounds per day. Each time the dairy makes cheese it costs $175 to set up the production process. The annual cost of carrying a pound of cheese in a refrigerated storage area is $12. Determine the optimal order quantity and the minimum total inventory cost.