Target continuously reviews its inventory levels for study desks. For one particular popular brand, it currently buys 180 on each order. Demand is 5,200 per year (100 per week) with a standard deviation of 60 per week. The supplier has a 3week lead time and it costs $225 per desk for Target to purchase these study desks. The ordering cost is $80 and holding costs are based on a 20% annual interest rate. You can assume that Target owns the chairs when they are delivered and the desired service level is 92%.

(a) Calculate the necessary parameter(s) (i.e., order amount and reorder point) for Targets inventory policy of this popular brand desks.

(b) What is the safety stock level with this inventory policy? (c) What is the expected number of replenishment cycles (inventory cycles) per year?

(d) What is the expected cost of ordering per year?

(e) Target wants to reduce the reorder point for this study desk. Which one of the following decreases the reorder point most? i) Lead time drops down to 2.5 weeks or ii) service level drops down to 90% and the standard deviation of demand per week goes down to 40 desks per week. Quantitatively justify your answer.