a.	Determine the optimal order quantity.

Optimal order quantity

boxes

b.	Determine the number of orders per year.

Number of order

per year

A drugstore uses fixed-order cycles for many of the items it stocks. The manager wants a service level of 98. The order interval is 13 days, and lead time is 2 days. Average demand for one item is 65 units per day, and the standard deviation of demand is 10 units per day. Given the on-hand inventory at the reorder time for each order cycle shown in the following table. Use Table Cycle On Hand 41 2 14 105 WN Cycle Units 1 2 3 A mail-order house uses 16,850 boxes a year. Carrying costs are 60 cents per box a year, and ordering costs are $96. The following price schedule applies. Number of Boxes 1,000 to 1,999 2,000 to 4,999 5,000 to 9,999 10,000 or more Price per Box $1.25 1.20 1.15 1.10