Insert Table Chart Text Shape Media Comment 1. A manager must set up inventory ordering systems for two new items, Gadget and Widget. Gadget is ordered from a supplier and is delivered at once, while Widget is produced in-house in batches of fixed size. The company operates 52 weeks a year, five days per week, and demand for each item is normally distributed. The company uses a continuous inventory system. The manager has gathered the following information about the items. Average demand Gadget 6,000 units per year 50 units per week $18 Widget 50 units per week 5 units per day $200 100 units per day $4,650 15% 1 week Standard deviation Unit cost (C) Production rate Ordering cost/Setup cost Annual holding cost (0) Lead time Service level desired (a) $250 20% 4 weeks 92% 97.5% 1. 2. 3. 4. 5. 6. Compute the optimal order quantity for Gadget How many orders of item Gadget will be placed per year? What should the safety stock be for Gadget for the desired level of service? What is the time between two consecutive orders of Gadget, in weeks? Compute the optimal order quantity for Widget. When should the manager reorder item Widget in order to achieve the desired level of service? How long will take to produce each production run (each batch) of item Widget, in days? 7