Experience suggests that usage of copy paper at a small copy centrecan be approximated by a Normal distribution with a mean of five boxes per day and a standard deviation of one-half box per day. Two days are required to fill an order for paper. Ordering cost is $ 10 per order, and annual holding cost is $10 per box.
a. Determine tire economic order quantity, assuming 250 workdays a year.
b. If the copy centre reorders when the paper on hand is 12 boxes, calculate the risk of a stock-out during a lead time.
c. If a fixed order interval of seven days, instead of the EOQ/ROP, is used for reordering, what shortage risk does the copy centre incur if it orders B6 boxes when the amount on hand is 12 boxes?