Question: For Floyd Distributors in Problem 29, we were given Q*= 25, D = 200, Ch = $5, and a normal lead-time demand distribution with

For Floyd Distributors in Problem 29, we were given Q*= 25, D = 200, Ch = $5, and a normal lead-time demand distribution with µ = 12 and σ = 2.5.

a. What is Floyd’s reorder point if the firm is willing to tolerate two stock-outs during the year?

b. What is Floyd’s reorder point if the firm wants to restrict the probability of a stock-out on any one cycle to at most 1%?

c. What are the safety stock levels and the annual safety stock costs for the reorder points found in parts (a) and (b)?


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