Q$1$

Annual Demand $=200,000$

The order cost $=$ $$100$

Annual holding rate $=25\%$

Price varies depending on the order quantity per the following schedule:

Orders between $1$ to $50,000$ units cost $$11.$

Orders of $50,001$ to $150,000$ cost $$10\mathrm{.}75$

Orders greater than $150,000$ cost $$10\mathrm{.}5$

Determine the optimal order quantity using the price discount model discussed in class. Show

all your work.

MGT$301$ Homework $2$

Name $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_$

Q$2$

You purchase a part that has normally distributed demand during the order lead time period.

Average demand during lead time is $1000$ units and the std$.$ deviation of demand during order

lead time is $50$ units. What is the safety stock and statistical reorder point that results in a service

level of $97\mathrm{.}5\%($assume z$=1\mathrm{.}96)?$