A large manufacturer purchases a part from a supplier under a continuous review system. The average demand is 400 units a day with a standard deviation of 50 units a day. It costs $55 to process each order. The holding cost for a part is $0.2 per month and the company has a policy of maintaining a 96% service level. The company operates 315 days per year. The time from when an order is placed to when it arrives at the company from its vendor is 5 days.

a. What is the reorder point? b. What order quantity would be appropriate? c. What is the total annual cost for this item? d. The firm decided to change to the periodic review system to control the item's inventory. For the most recent review, an inventory clerk checked the inventory of this item and found 784 units. There were no scheduled receipts at the time. How many units should be ordered?

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