# Question

An electronics retailer carries a particular cellular telephone with the following characteristics:

Average monthly sales = 120 units

Ordering cost = $25 per order

Carrying cost = 35 percent per year

Item cost = $300 per unit

Lead time = 4 days

Standard deviation of daily demand = .2 unit

Working days per year = 250

a. Determine the EOQ.

b. Calculate the reorder point for a 92 percent service level, assuming normally distributed demand.

c. Design a Q system for this item.

d. What happens to the reorder point when the lead time changes? What happens to the reorder point when the standard deviation of demand changes?

Average monthly sales = 120 units

Ordering cost = $25 per order

Carrying cost = 35 percent per year

Item cost = $300 per unit

Lead time = 4 days

Standard deviation of daily demand = .2 unit

Working days per year = 250

a. Determine the EOQ.

b. Calculate the reorder point for a 92 percent service level, assuming normally distributed demand.

c. Design a Q system for this item.

d. What happens to the reorder point when the lead time changes? What happens to the reorder point when the standard deviation of demand changes?

## Answer to relevant Questions

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