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2.What are some plusses and minuses of the various scenarios from the required questions, and your suggestion(s) in EQ1?3.Among the scenarios from the required questions and your suggestions in EQ1, which scenario do you recommend that HP adopt,and why?
Assume a 98% Cycle Service Level. The z value to ensure a 98% CSLis F-1(0.98) = 2.05. Assume 4.33 weeks in a month. P. 8 of the case says that inventory carrying cost estimates ranged from 12% to 60%; you should assume it equals 25% and the manufacturing cost of each printer is $250.Note that the lead time for ocean freight is 5 weeks, and the lead time for air freight is 1 week.You will need to compute the standard deviation of the aggregate demand for all six options of printer in Europe. There are two ways todo this (the two methods yield almost the same answer): a)Compute the aggregate std dev via the sample std dev of the monthly aggregate European demand in Exhibit 4. b)Compute the aggregate std dev as the square root of the sum of the squares of the six individual std devs.To standardize, everyone should use method (a).While calculating annual inventory costs, remember to include pipeline (in-transit) inventory, safety stock, and cycle stocks. Recall that the annual average inventory cost is computed as follows: Annual Average Inventory Cost= (Safety Stock + Average In-Transit Inventory + Average Cycle Inventory) × (unit cost) × (percent carrying cost). Note that in the sort of fixed time period model that we are using here,the ordering cost is fixed and can therefore be ignored. We can find the average inventory cost per printer by dividing the annual average inventory cost by mean annual demand (mean monthly demand × 12). “Current Policy” for Question 2: The “current policy” used by HP is not clearly explained in the case, so I carefully explain it here. According to the case, “the target inventory levels