Question 1 (4+5+6=15 points) - EOQ model The ABC is a manufacturing company that produces a range of household appliances, including four different models of refrigerators. One of the critical components used in the production of these refrigerators is the "Compressor," which is used in the two most expensive models, and has an estimated annual demand of 1440 units. The ABC estimates the cost to place an order is $300, and the holding cost for each compressor is $40 per month. a) Currently, not knowing about EOQ, the purchasing manager places an order for the compressor once a month, i.e., twelve times per year. What is the annual total inventory cost? [Rounded to 2 decimals] (Hint: you need to convert the monthly holding cost to yearly cost.) b) You are new hire and you realize that using the optimal order quantity Q would reduce total inventory cost. Find the optimal order quantity Q [Rounded to whole number]. When using this optimal order quantity, what is the order cycle (in months) between two orders and what is the annual total inventory cost? [Rounded to 2 decimals] c) Suppose the supplier sells the product in boxes. Each box contains 4 compressors. What is the optimal order quantity? What is the corresponding annual inventory cost? Question 2(3+2+2+2+6=15 points) - (Lead time, Reorder Point, Quantity Discounts) You work at an electronics store and realize that the demand for a new gaming laptop is stable and EOQ assumptions are satisfied. You further collect the following data for the laptop: - Average annual sales =1000 units - Ordering cost =$100 per order - Carrying cost =20% of the item cost per year - Item cost =$100 per unit - Lead time =10 days - Working days per year =250 a) After noticing that the store's current inventory policy is suboptimal, you want to impress your manager by making a proposal for improvement. What is the optimal order policy for this laptop (write in the format of [R,Q]) ? b) What is the total ordering cost under the optimal order policy? c) What is the total holding cost under the optimal order policy? d) Consider your answers in part b and c. Which one of the following is correct (circle one)? Explain why? - Total ordering cost=total holding cost - Total ordering cost>total holding cost - Total ordering cost3% discount if you are willing to receive shipments of laptops every 6 months. Would you take this discount if you want to minimize the annual total cost