Question: (20 + 10 pts) Weekly demand for OnePlus 8 Pro smartphones at an online retailer in the U.S. is normally distributed with a mean of

(20 + 10 pts) Weekly demand for OnePlus 8 Pro smartphones at an online retailer in the U.S. is normally distributed with a mean of 4000 and a standard deviation of 1000. The wholesale price of the phone is $500 and the retail price is $700. OnePlus charges a fixed processing and delivery fee of $2000 for each order, and it takes two weeks to deliver an order. The online store is targeting a service level of 95% (z = 1.65). Assume 50 weeks per year and an annual interest rate of 20% to calculate the inventory holding cost.

Questions:

1. If lead times are equally likely to be 2 or 3 weeks, what re-order point should the online store use?

2. The online store offers free shipping to its customers, but it pays UPS $10 to ship a phone from its warehouse in New Jersey to a customer in the east (to the Rocky Mountain) and $15 to a customer in the west. The company noticed that 70% of the demand is from the east market and 30% from the west. What is the companys annual cost associated with selling OnePlus 8 Pro?

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