HW #4. Solve the following problems. Show your work. This homework is worth 20 points. (Note: In the exams/quizzes, z-values will be given. But, for homeworks, you need to find z-values for yourselves.)

I. Suppose weekly demand for an item is 100 units. Annual holding cost is $10 per unit, and ordering cost is $20 per order. Assume 52 weeks per year.

1. What is the EOQ? If the EOQ is used for order quantity,

2. What is the average inventory level?

3. What is the annual inventory-holding cost?

4. What is the number of orders per year?

5. What is the annual ordering cost?

6. What is the time between orders in weeks?

II. Weekly demand for a certain product is normally distributed with mean 100 and standard deviation 8. The source of supply is reliable and maintains a constant leadtime of 1 week. The cost of placing an order is $10 and annual holding cost is $2 per unit. Assume 52 weeks per year. Management wants to satisfy a 95% probability of not running out of stock in any one ordering cycle.

1. What is the average demand during leadtime?

2. What is the standard deviation of demand during leadtime?

3. What should be the safety stock?

4. What should be the reorder point?

5. What should be the order quantity?

6. State the ordering policy by using a sentence.