1. Consider the Reorder Point inventory control for the following setting: annual demand = 15,000; order cost = $50; carrying cost = 20% per year; item value = $20; Average lead time = 2 weeks; stockout cost = $5/unit short; probability of being in stock = 80%; standard deviation of demand = 40/week; and standard deviation of lead time = 0.8 weeks. The optimal order size for this setting is 1174.13 units.

1. If the product is only sold in multiple of 800 units, how many should be ordered and what it the total cost?

2. By what percentage does the total cost change if the Probability of being in-stock during the lead time is 90%, instead of 80%?

2. The table below provides demand data for 6 weeks (weeks 31-36 for the current year) for one product. Inventory is managed with a periodic review system where T = 5 weeks and M = 280. The previous order was for 120 units at the end of week 28. The lead time is a constant 4 weeks. At the beginning of week 31 the inventory level is 130 units. Orders are made at the end of a week.

1. When is the next order? end of week __________

2. How large is the next order? ___________

Week	Demand	Inventory
31	30
32	40
33	45
34	30
35	30
36	30