It is your responsibility, as the new head of the automotive section of Nichols Department Store, to ensure that reorder quantities for the various items have been correctly established. You decide to test one item and choose Michelin tires. A perpetual inventory system has been used, so you examine this as well as other records and come up with the following data:

Cost per tire : $65 each

Holding cost : 20 percent of tire cost per year

Demand : 2,500 per year

Ordering cost : $55 per order

Standard deviation : 5 tires

Lead time : 3 days

Because customers generally do not wait for tires but go elsewhere, you decide on a service probability of 98 percent. Assume the demand occurs 350 days per year.

Provide your answer to the followingQuestions:

1. Determine the Economic Order Quanty
2. Compute the safety stock quantity
3. Compute the ReOrder point
4. If the lead time in now 4 days. Determine the new safety stock.