1. a1) On average, how long a diskette spend in stock?
Problem 7.2
R/week = N(1000,150)
L = 4 week
Q = 20,000
ROP = 4,200
50 weeks /yr
Average R /year = 50,000
S =100
C = 1
h = .25  H = .25
Is = ROP – LTD
Is = = 200
Cycle inventory = Q/2 + Is
Cycle inventory = 20000/ = 10200
I = RT  = 1000T = 10.2 weeks
a2) What is annual ordering and carrying costs
Number of orders R/Q
R/Q = 50,000/20,000 = 2.5
Ordering cost = 100(2.5) = 250
Average inventory = 20000/2 +200
Carrying cost = .25( )=
Carrying cost = = 2550
Total inventory system cost = = 2800
Carrying cost (excluding safety stock cost) = 2500
Ordering cost = 250
What does it say about EOQ?
EOQ<20,000

2. b1) Identify optimal ordering policy with respect to
EOQ and ROP. Assuming SL = .95
Problem 7.2
R/week = N(1000,150)
50 weeks /yr
Average R /year = 50,000
L = 4 week
S =100
C = 1
h = .25  H = .25
=6325
Quantity
Service level
Risk of a
stockout
Probability of
no stockout
ROP
Average
demand
Safety
stock
z-scale z

3. z b1) Identify optimal ordering policy with respect to
EOQ and ROP. Assuming SL = .95
Problem 7.2
R/week = N(1000,150)
50 weeks /yr
Average R /year = 50,000
L = 4 week
S =100
C = 1
h = .25  H = .25
Given a 95% SL
95% Probability
The table will give you z
Page 319: Normal table z
Second digit
after decimal
Up to the first digit
after
decimal
0.95

4. b2) On average, how long a diskette spend in stock?
Problem 7.2
R/week = N(1000,150)
50 weeks /yr
Average R /year = 50,000
L = 4 week
S =100
C = 1
h = .25  H = .25
b2) On average, how long a diskette spend in stock?
Average inventory = 6325/
Average inventory = 3658
I = RT
3658 = 1000T
T = 3.66 weeks
c) Reduce lead time form 4 to 1.
What is the impact on cost and flow time
Safety stock reduces from 495 to 247.5 units reduction
That is .25(247.5) = $62 saving
Average inventory = (6,325/2) = 3,410.
Average time in store  I = RT
3410 = 1000T
T = 3.41 weeks