A Production system consumes 1200 of a ceramic capacitors per month. It cost $16 to place an order for capacitors with is supplier. The price of each capacitor is $0.75. The holding coast for capacitors are 20% of the price of the capacitor per month.

1. What is the optimal order quantity? How often should the capacitor be ordered?
2. Assume that the standard deviation on the monthly capacitor demand is 121 capacitors and the lead time to obtain more capacitors if you run out is 3 days (with a standard deviation 6 hours). If you want to avoid stockout situations 90% of the time, how much safety stock should you have? Assume 30 days per month.