Daily demand for packages of five videotapes at a warehouse store is found to be normally distributed with mean 50 and standard deviation 5 . When the store orders more tapes, the ordering cost is $42 and the orders take 4 days to arrive. Each pack of tapes costs $7.20 and there is a 24% annual holding cost for inventory. Assume the store is open 360 days a year
a. What is the EOQ?
b. If the store wants the probability of stocking out to be no more than 5%, and demand each day is independent of the day before, what reorder point should be set?
c. How much of your reorder point in part b) is safety stock?
a. Q* = 866.025
b. DDLT is N(200,10)
r = 200 + 1.645(10) = 216.45
c. 16.45
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