A distributor of large appliances needs to determine the order
A distributor of large appliances needs to determine the order quantities and reorder points for the various products it carries. The following data refer to a specific refrigerator in its product line:
Cost to place an order.............$ 100
Holding cost............... 20 percent of product cost per year
Cost of refrigerator .............$ 500
Annual demand ..............500 refrigerators
Standard deviation of demand during lead time..10 refrigerators
Lead time each ...............7 days
Consider an even daily demand and a 365- day year.
a. What is the economic order quantity?
b. If the distributor wants a 97 percent service probability, what reorder point, R, should be used?

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