A small copy center uses five 500 sheet boxes of copy paper a week. Experience suggests that usage can be well approximated by a normal distribution with a mean of 5 boxes per week and a standard deviation of one-half box per week. Two weeks are required to fill an order for letterhead stationary. Ordering cost is $ 2.00 and annual holding is 20 cents per box

A) determine the economic order quantity, assuming a 52 week year
B) If the copy center reorders when the supply on hand is 12 boxes, compute risk of a stockout.
c) If a fixed interval of seven weeks instead of ROP is used for reordering, what risk does the copy center incur that it will run out of stationary before this order arrives if it orders 36 boxes when the amount on hand is 12 boxes?

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Please see the attached file.

Solution:
Demand per week (d)= 5 boxes
D=5*52 =260 boxes per annum
Standard deviation = 0.5boxes per week
LT = 2 weeks
Co =$2 per order
Ch=$0.20 per box per year
A) Determine the economic order quantity, assuming a 52 week year
EOQ = = 72.11 = 72 boxes
EOQ =72 boxes
B) If the copy center reorders when the supply on hand is 12 boxes, compute risk of a stock out.
Risk of stock out is the probability that the demand will be greater than 12 boxes during the lead time.
Re-order point = DDLT + Safety stock
? DDLT = demand ...

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Problem 6-20
Note: Please review the PowerPoint Slides using the link below:
http://wps.prenhall.com/bp_render_qam_9/0,11119,2557279-,00.html
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How many orders per year would be placed, what is the annual ordering cos

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The problem is as follows:
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Annual demand: 2500
Holding cost per bracket per year: $1.50
Order cost per order: $18.75
Lead time: 2 days
Working days per year: 250
Please answer the following questions:
A. What is the Economic Order Quantity (EOQ)?
B. Given the EOQ: What is the annual inventory holding cost?
C. Given the EOQ: What would be the