a. Safety stock reduction from aggregating customer demand from different locations is larger when the demand correlation between locations is higher. (True/False)

b. The fixed-order quantity inventory models generate order quantities that vary from time period to time period, depending on the actual demand rate. (True/False)

Samsung's mobile communications division, a smartphone manufacturer, uses 20,000 memory chips per month. Their trucking company charges Samsung 300 per shipment, independent of the quantity purchased. The manufacturer offers an all unit quantity discount with a price of 1 per memory chip for orders under 18,000 units, 0.96 per chip for orders between 18,000 and 36,000 units, and 0.92 per chip for orders larger than 36,000 units. Samsung incurs a holding cost of 15 percent.

1. What is the optimal order quantity for Samsung?

2. What is the annual cost of such a policy?

3. What is the cycle inventory of memory chips at Samsung?

4. How does it compare with the cycle inventory if the manufacturer does not offer a quantity discount but sells all chips at 1, 0.96 and 0.92 per unit respectively?