(a) Use the stochastic continuous-review model presented in Sec. 18.6 to obtain an (R, Q) policy for Have a Cow for each of the two alternatives of which supplier to use.

(b) Show how the reorder point is calculated for each of these two policies.

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(c) Determine and compare the amount of safety stock provided by the two policies obtained in part (a).

(d) Determine and compare the average annual holding cost under these two policies.

(e) Determine and compare the average annual acquisition cost (combining purchase price and shipping cost) under these two policies.

(f) Since shortages are very infrequent, the only important costs for comparing the two suppliers are those obtained in parts (d) and (e). Add these costs for each supplier. Which supplier should be selected?

(g) Jed likes to use the beef (which he keeps in a freezer) within a month of receiving it. How would this influence his choice of supplier?


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