Aberwald Corporation expects to order 126,000 memory chips for inventory during the coming year, and it will use this inventory at a constant rate. Fixed ordering costs are $175 per order; the purchase price per chip is $25; and the firm's inventory carrying cost is equal to 20 percent of the purchase price. (Assume a 360-day year.)

(a) What is the economic ordering quantity for chips?

(b) If Aberwald holds a safety stock equal to a 30-day supply of chips, what is its average inventory level?

(c) Assume that Aberwald holds a safety stock equal to a 30-day supply of chips. What is the maximum amount of inventory that Aberwald will have on hand at any time, that is, what will be the inventory level right after a delivery is made?

(d) How many orders should Aberwald place during the year?

(e) If the lead time for placing an order is 5 days, and Aberwald holds a safety stock equal to a 30-day supply of chips, then at what inventory level should an order be placed?

(f) If Aberwald holds a safety stock equal to a 30-day supply of chips, what is Aberwald's minimum total cost of ordering and carrying inventory?

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