Question: CVS uses a ( Q , r ) inventory system to control its stock levels. For a 1 2 - ounce bag of Barilla three

CVS uses a (Q,r) inventory system to control its stock levels. For a 12-ounce bag of Barilla three-
cheese tortellini, historical data show that the distribution of monthly demand is approximately
normal, with a mean of 28 and a standard deviation of 8. Replenishment lead time for the tortellini is
about 14 weeks. Each bag of tortellini costs the store $6. Although excess demands are backordered,
the store owner estimates that unfilled demands cost about $10 each in bookkeeping and loss-of-
goodwill costs. Fixed costs of replenishment are $15 per order, and holding costs are based on a 30%
annual interest rate.
a. What are the optimal lot sizes and reorder point for the tortellini?
b. What is the optimal safety stock for the tortellini?

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