14 Each month, customers are equally likely to demand 1 or 2 computers from a Pearco dealer. All orders must be met from current stock. Two ordering policies are under consideration:

Policy 1 If ending inventory is 2 units or less, order enough to bring next month’s beginning inventory to 4 units.

Policy 2 If ending inventory is 1 unit or less, order enough to bring next month’s beginning inventory up to 3 units.

The following costs are incurred by Pearco:

It costs $4,000 to order a computer.

It costs $100 to hold a computer in inventory for a month.

It costs $500 to place an order for computers. This is in addition to the per-customer cost of $4,000.

Which ordering policy has a lower expected monthly cost?