Question: Consider two items with the following characteristics: Unit Value Demand D xL L Item ($/Unit) (Units/Year) (Units) (Units) 1 10.00 300 100 10 2 1.00

Consider two items with the following characteristics:

Unit Value Demand D xL σL Item ($/Unit) (Units/Year) (Units) (Units)

1 10.00 300 100 10 2 1.00 300 100 35 Suppose that the inventory controller has set the SS of each of these items as a 1-month time supply.

a. What are the SSs in units? In dollars?

b. What is the P1 value associated with each item?

c. Reallocate the same TSS (in dollars) so that the two items have the same value of P1.

d. What reduction in TSS is possible if both items have P1 = 0.95?

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