1. A firm has to place orders for the supply of raw materials every 3 months. The raw materials are pro- cured from a supplier at periodic intervals. The annual requirements of the raw materials amount to Rs. 12 lac. The cost of ordering is estimated to be Rs. 5,000 per order and the cost of carrying inventory is estimated to be 25% of the value of inventory. Average lead time for procurement of the raw materi- als is observed to be two months. The demand for the raw materials can be approximated to a normal distribution with a standard deviation of Rs.1 lac per period. Design an inventory system for the raw materials for a service level of 97.5%.