Annual demand (D) = 2000 boxes

Ordering cost (S) = $62

Price = $76 per box

Holding cost (H) = 28% of price = 28% of $76 = $21.28

Average weekly demand (d) = D/Number of weeks per year

= 2000/52

= 38.46 boxes

a) Economic order quantity (Q*) = sqrt of (2DS / H)

= sqrt of [(2 x 2000 x 62) / 21.28)]

= 107.95 or rounded to 108 boxes

Total cost with EOQ = Holding cost + ordering cost

= [(Q/2)H] + [(D/Q) S]

= [(108/2)21.28] + [(2000/108)62]

= $1149.12 + $1148.15

= $2297.27

If with the current policy order quantity (Q) = 1000 boxes

Total cost = Ordering cost + Holding cost

= [(D/Q) S] + [(Q/2)H]

= [(2000/1000)62] + [(1000/2)21.28]

= $124 + $10640

= $10764

Extra cost = Total cost with current policy – Total cost with EOQ

= $10764 – $2297.27

= $8466.73

b) Standard deviation of weekly demand (sigmad) = 100 boxes

Lead time (L) = 2 weeks

At 99% service level value of Z = 2.33

Reorder point = d x L + (Z x sigma d x sqrt of L)

= 38.46 x 2 + (2.33 x 100 x sqrt of 2)

= 76.92 + (2.33 x 100 x 1.41)

= 76.92 + 328.53

= 405.45 boxes

a) with a periodic review system,

Review period (P) = 2 weeks

Target inventory level = d(P+L) + [Z x sigma d x sqrt of (P+L)]

= 38.46(2+2) + [2.33 x 100 x sqrt of (2+2)]

= (38.46 x 4) + (2.33 x 100 x sqrt of 4)

= 153.84 + (2.33 x 100 x 2)

= 153.84 + 466

= 619.84 boxes

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