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1) A small toy store has organized its 10 inventory items on an annual dollar-volume basis. The information below shows the items, their annual demands, and unit costs. How should the store classify these items into groups A, B, and C?
Item Number Annual Volume (Units) Unit Cost ($)
Item 1 300 $10
Item 2 1000 $30
Item 3 500 $60
Item 4 100 $2
Item 5 1500 $20
Item 6 600 $50
Item 7 2000 $1.50
Item 8 900 $70
Item 9 1200 $2.00
Item 10 700 $40
2) A grocery store is aiming for a 95% service level for 1 gallon bottles of whole milk. The mean demand during lead time is 200 with a standard deviation of 40. Milk has a carrying cost of $0.50 per unit per year. How much safety stock should the grocery store maintain in milk and what is the reorder point?
