Annual demand is 16000 units, cost per order is $75 and carrying cost per unit as a percentage is 10%. The company works 250 weeks a year; the lead-time on all orders placed is 6working days.

1. Assuming constant lead-time demand, and a unit cost of $45what is the economic order quantity? What is the reorder point.

2. If lead-time demand shows variability that follows a normal distribution with a mean =420 and a standard deviation =20, what will the revised reorder point if two stock-outs (shortages) are allowed?

3. What is the companys reorder point if the probability of a stock-out on any cycle is restricted to 0.05?