ABC Company supplies ink cartridges for printers on the aftermarket (i.e they sell replacement cartridges). The demand for the cartridge averages 20,002 units per year and operates 365 days per year. The holding cost of the cartridge is $5 per unit per year while the ordering cost is $100 per order. The company is currently using a periodic (P) inventory system, holding 1000 units in safety stock to cover demand uncertainty and placing orders for every 73 days. The company is investigating the possibility of implementing a continuous review (Q) inventory system with holding 15 units in safety stock to cover demand uncertainty. Use the information to answer the next 4 questions.

1. Suppose the company is using a Q system with a lot size of 200 (not the EOQ). What should the reorder point be? Assume 15 units in safety stock.

A Less than 175 units

B Greater than or equal to 175 units but less than 225 units

C Greater than or equal to 225 units but less than 275 units

D Greater than or equal to 275 units but less than 300 units

E More than 300 units

2. Under the company's current P system, how much will the annual holding costs be? Assume 1000 units will still be held in safety stock.

A Less than $9000

B Less than $11,000

C Greater than or equal to $11,000 but less than $14,000

D Greater than or equal to $14,000 but less than $17,000

E Greater than $17,000

3. Under the company's current P system, how much will annual ordering costs be? Assume 1000 units still being held in safety stock.

A Less than $150

B Greater than or equal to $150 but less than $250

C Greater than or equal to $250 but less than $350

D Greater than or equal to $350 but less than $450

E Greater than or equal to $450

4. What should the target level be for the P system?

A Less than 1500 units

B Greater than or equal to 1500 units but less than 2500 units

C Greater than or equal to 2500 units but less than 3500 units

D Greater than or equal to 3500 units but less than 4500 units

E Greater than or equal to 4500 units

what?