Question: In the previous problem, assume that it costs $300 to place an order. The holding cost per DVD player held in inventory per year is

In the previous problem, assume that it costs $300 to place an order. The holding cost per DVD player held in inventory per year is $15. The cost each time a customer orders a DVD player that is not in stock is estimated at $40. (All demand is backlogged.)

a. Find the optimal ordering policy for parts a and b of the previous problem (when lead time is known for certain and when it is not).

b. How much more is the expected annual holding cost when L is random than when it is known with certainty? Why is this cost greater in the random case?

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