Average demand in a year is $12,000$ units. Each order incurs a fixed ordering cost of $$100$ and the unit holding cost rate is estimated as $$2\mathrm{.}40$ per unit per year. The firm experiences non$-$zero delivery lead times. The demand during a lead time period is normally distributed with an average of $200$ units and a standard deviation of $40$ units. The firm management desires that they satisfy all of the demand during a lead time period with $95\%$ probability.

The manager observes that the $($Q$,$r$)$ model is the appropriate model in this setting and wants to determine the parameters of this policy.