Williams Corporation is a major manufacturer of food processors. It purchases motors from Norse Corporation. Annual demand is 156,000 motors per year or 3,000 motors per week. The ordering cost is $225 per order. The annual carrying cost is $7.80 per motor. It currently takes 3 weeks to supply an order to the assembly plant.

Question:

1. What is the optimal number of motors that Williams managers should order according to the EOQ model?

2. At what point should managers reorder the motors, assuming that both demand andpurchase-order lead time are known with certainty?

3. Now assume that demand can vary during the 3-week purchase-order lead time. The following table shows the probability distribution of various demand levels:

Total Demand for Motors for 3 weeks	Probability of Demand (sums to 1)
5,000	0.10
6,000	0.20
9,000	0.40
9,250	0.10
9,450	0.20

If Williams runs out of stock, it would have to rush order the motors at an additional cost of $4 per motor. How much safety stock should the assembly plant hold? How will this affect the reorder point and reorder quantity?