Answer Happy

MicroApple is a manufacturer of personal computers. It currently
manufactures a single model — the MacinDOS — on an assembly line at
a steady rate of 500 per week. MicroApple orders the hard drives
for the MacinDOS (1 per computer) from an outside supplier at a
cost of $30 each. Additional administrative costs for placing an
order total $30. The annual holding cost is $6 per drive. If
MicroApple stocks out of hard drives, production is halted, costing
$100 per drive short. Because of the seriousness of stockouts,
management wants to keep enough safety stock to prevent a shortage
before the delivery arrives during 99% of the order cycles.
The supplier now is
offering two shipping options. With option 1, the lead time would
have a normal distribution with a mean of 0.5 week and a standard
deviation of 0.1 week. For each order, the shipping cost
charged to MicroApple would be $100 plus $3 per drive. With
option 2, the lead time would have a uniform distribution from
1.0 week to 2.0 weeks. For each order, the shipping cost
charged to MicroApple would be $20 plus $2 per drive.