Question

A product with an annual demand of 1100 units has C_o = $24.5 and C_h = $7. The demand exhibits some variability such that the lead-time demand follows a normal probability distribution with µ = 30 and σ = 6.

1. What is the recommended order quantity? If required, round your answer to two decimal places.
   
   Q^* =
   
2. What are the reorder point and safety stock if the firm desires at most a 3% probability of stock-out on any given order cycle? If required, round your answers to the nearest whole number.
   
   Record point =
   
   Safety stock =
   
3. If a manager sets the reorder point at 35, what is the probability of a stock-out on any given order cycle? If required, round your answer to four decimal places.
   
   P(Stockout/cycle) =
   
   How many times would you expect a stock-out during the year if this reorder point were used?
   
   Number of Orders =

Answer 1