Weekly demand for DVD-Rs at a retailer is normally distributed with a mean of 1,000 boxes and a standard deviation of 150. Currently, the store places orders to the supplier, with a reorder point of 4,200 boxes. The order quantity to the supplier is fixed at 5,000 boxes. Replenishment lead time is 4 weeks, fixed order cost per order is $100, each box costs the retailer $10, and the inventory holding cost is 25% per year.

Question

Under the current order quantity of 5,000 boxes (not the EOQ you calculated before) and current reorder point of 4,200 boxes, what would be the order-up-to level S that the retailer should use as a baseline to calculate how much inventory to order when conducting a periodic review?

Answer 1

9200