Assume a 20 percent annual interest rate for computing the holding cost.

a. What value of Q and R is Hy Cassorla using to control the inventory of white dress shirts?

b. What fill rate (Type 2 service level) is being achieved with the current policy?

c. Based on a 99 percent fill rate criterion, determine the optimal values of Q and R that he should be using. (Assume four weeks in a month for your calculations.)

d. Determine the difference in the average annual holding and setup costs between the policies in parts

(b) and (c).

e. Estimate how much time would be required to pay for a $25,000 inventory control system, assuming that the dress shirts represent 5 percent of Hy’s annual business and that similar savings could be realized on the other items as well.