The managers have told you that your first priority should be to oversee the inventory control of a specific item, P-465R, which has just seen a large increase in price. Since last year, the supplier of the item has been acquired by a competitor and increased the prices for certain items, including this one. As a result, in this year's contract, the item is purchased at $12 per item.

Pumper's is currently using an (s,Q) policy for replenishment of P-465R, where Q is found using the EOQ model. The annual demand for the item is 2,700 units per year and the forecast for the next year shows an RMSE of 245 units. The ordering cost is $8 per order. The current lead-time is constant at 7 weeks. The holding cost is 20% per year, and for each unit short there is a penalty cost of $5. Pumper's takes ownership of the stock only when it arrives at its location. In your calculations, assume 50 weeks per year.

Q1)What is the cycle service level associated with the policy? Answer as a percentage with two decimals. For instance, if your solution is 94.2934%, answer 94.29

Management has suggested that you might want to switch to periodic review, something the supplier of item P-465R was previously against but is now encouraging. You would review the inventory every 2 weeks.

Q2)If you switch to an (R,S)-policy using the transformations from the lesson, what are the expected total annual costs? Please round to closest integer dollars. Answer without the dollar symbol.

Q3)Which of the following statements is/are true ? Note that there may be more than one correct answer. Check all boxes that apply.

A)The expected total annual cost is higher with the (s,Q) policy

B)The expected total annual cost is higher with the (R,S) policy

C)The safety stock level is higher with the (s,Q) policy

D)The safety stock level is higher with the (R,S) policy

E)None of the above