Question: ABC has a demand (which is deterministic) for 27,000 DVDs per month. The cost of a DVD is $2.30 and the holding cost is 30

ABC has a demand (which is deterministic) for 27,000 DVDs per month. The cost of a DVD is $2.30 and the holding cost is 30 percent of the cost of the product per year. The ordering cost is $700 per order. There are 350 days per year. The lead time is 7 days.

c) What are the annual cost of ordering cost?

d) Suppose that the demand has now changed. It is probabilistic and follows a normal distribution with a mean demand during lead time of 20,000 DVDs and the standard deviation of the demand during lead time is equal to 1,500 DVDs. What are the safety stock and the reorder point if the company wants no be able to meet demand 90% of the time?

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