Roosters Co.is a local coffee roaster. They pride themselves in selling the best coffee from organic coffee growers around the world. Demand, price, and lead time information for three of the beans they carry in stock are provided below. You may assume that demand is normally-distributed and the target service level is 98%.

Coffee type (origin)	Average annual demand (pounds)	St deviation of annual demand	Price ($/pound)	Lead time from the supplier (weeks)
Dark roast (Uganda)	4000	300	$2.5	4
Dark roast (Peru)	2500	550	$3.4	5
Light roast (Honduras)	5000	400	$2.6	5

Assume that each type of coffee is shipped from a single supplier in the respective country and regardless of the country, the fixed order cost is $500. The annual holding cost per pound is 30% of the price of the item.

a. Find the EOQ and the safety stock levels for each of the coffee beans.

b. Due to cost cutting efforts, the company decided to roast and sell only the beans from Honduras. You may assume that total demand for coffee will not be affected by this change. In other words, customers who were buying the other two types of coffee are willing to replace them with the coffee from Honduras.

What will be the new EOQ and safety stock levels for the beans from Honduras?

c. Compare the total annual cost of part (a) and (b) and determine how much money the company will save by switching to a single type of coffee, if any. Note that you will need to include the annual procurement costs in your calculations.