As the purchasing manager of a large school district, one of your tasks is to procure computer resources for classrooms. District policy is to replace class room desktop computers every three years. This year’s computer demand is 2,400 units. One of your suppliers offers the desktop computer units for sales at $1,200 per unit for up to 199 units and $1,100 per unit for orders 200 units or more. The order cost (including ordering and transportation) is $1,000 per order and inventory holding cost is 30% per unit per year. Calculate the economic order quantity and the total costs for both options. Which option is acceptable?

Due to occasional theft and accidents, the demand for computers is normally distributed with the mean of 200 units per month and standard deviation of 10 units per month. Lead time interval is 1 month. Determine the reorder point if you desire a service level of 0.05.