A manager must set up inventory ordering systems for two new product items, P34 and R35. P34 can be ordered at any time, but R35 can be ordered only once every four weeks. The company operates 50 weeks a year and the weekly demand for both items are normally distributed. The manager has gathered the following information about the items. Item P34 Item R35 Average weekly demand 60 units 70 units Standard deviation 4 units per week 5 units per week Unit cost $15 $20 Ordering cost $70 $30 Annual holding cost 30% 30% Lead time 2 2 weeks Acceptable stock-out risk 5% 2.5%
a. When should the manager reorder each item?
b. Compute the order quantity for P34.
c. Compute the order quantity for R35.