Question: A post office uses 10,000 boxes a year. Carrying costs are 50 cents per box a year, and ordering costs are $100. The following price

A post office uses 10,000 boxes a year. Carrying costs are 50 cents per box a year, and ordering costs are $100. The following price schedule applies.

c		Price per Box
1,000 to 3,999		1.20
4,000 to 6,999		1.10

a. Determine the optimal order quantity.

b. The post office open 250 days per year. Usage appears normally distributed with a standard deviation of 4 boxes per day. The lead time is 4 days. What ROP will provide a lead time service level of 90 percent? How about its safety stock? (Hint: The average daily usage equals the annual usage divided by the open days per year.

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