1. Leonard's Chic Hats store is open 200 days a year and sells an average of 15 fashionable hats a day. (Demand can be assumed to be distributed normally, with a standard deviation of 5 hats per day.) The hat supplier is located in San Diego, CA. Hats are shipped from San Diego within exactly 4 days after Leonard orders. The ordering cost is fixed at $20 per order. The annual holding costs for the hats are $5.

a) What is the economic order quantity (EOQ) for Leonard's chic hats?

b) What are the total annual holding costs of stock for Leonard's chic hats?

c) What are the total annual ordering costs for Leonard's chic hats?

d) Assume that management has specified that no more than a 1% risk during stockout is acceptable. What should the reorder point (ROP) be?

e) What is the safety stock needed to attain a 1% risk of stockout during lead time?

f ) What is the annual holding cost of maintaining the level of safety stock needed to support a 1% risk?

g) If management specified that a 2% risk of stockout during lead time would be acceptable, would the safety stock holding costs decrease or increase?