1 A hospital must order the drug Porapill from Daisy Drug Company. It costs $500 to place...

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1 A hospital must order the drug Porapill from Daisy Drug Company. It costs $500 to place an order and $30 to review the hospital’s inventory of the drug. Annual demand for the drug is N(10,000, 640,000), and it costs $5 to hold one unit in inventory for one year. Orders arrive one month after being placed. Assume that all shortages are backlogged.

a Estimate R and the number of orders per year that should be placed.

b Using the answer in part (a), determine the optimal

(R, S) inventory policy. Assume that the shortage cost per unit of the drug is $100.

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