One of the products sold by OfficeMax is a Hewlett-Packard LaserJet Z99 printer. As purchasing manager, you have the following information for the printer:

b. (**) Calculate annual ordering costs and holding costs (ignoring safety stock) for the EOQ. What do you notice about the two?

c. (**) Suppose OfficeMax currently orders 120 printers at a time. How much more or less would OfficeMax pay in holding and ordering costs per year if it ordered just 12 printers at a time? Show your work.

d. (**) What is the reorder point for the printer? How much of the reorder point consists of safety stock? For parts e and f, use the following formula to consider the impact of safety stock (SS) on average inventory levels and annual holding costs:

e. (***) What is the annual cost of holding inventory, including the safety stock? How much of this cost is due to the safety stock?

f. (***) Suppose OfficeMax is able to cut the lead time to a constant 1 week. What would the new safety stock level be? How much would this reduce annual holding costs?

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