15. Ollah’s Organic Pet Shop also sells bags of cedar chips for pet bedding or snacking (buyer’s choice). The supplier has offered Ollah the following terms:

Order 1–100 bags, and the price is $6.00 a bag.

Order 101 or more bags, and the price is $4.50 a bag. Annual demand is 630, fixed ordering costs are $9 per order, and the per-bag holding cost is estimated to be around $2 per year.

a. (*) What is the economic order quantity for the bags?

b. (**) What order quantity should Ollah order, based on the volume discount? Is this different from the EOQ?

If so, how could this be?

c. (**) Suppose the lead time for bags is a constant 2 weeks, and average weekly demand is 12.6 bags, with a standard deviation of 3.2 bags. If Ollah wants to maintain a 98% percent service level, what should her reorder point be?