What is the recommended order quantity?
31. A product with an annual demand of 1000 units has Co = $25.50 and Ch = $8. The de- mand exhibits some variability such that the lead-time demand follows a normal probabil- ity distribution with m = 25 and s = 5.
a. What is the recommended order quantity?
b. What are the reorder point and safety stock if the firm desires at most a 2% probabil- ity of stockout on any given order cycle?
c. If a manager sets the reorder point at 30, what is the probability of a stockout on any given order cycle? How many times would you expect a stockout during the year if this reorder point were used?
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