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QUESTION 1 The home appliance department of a large department store is using a lot size-reorder point system to control the replenishment of a particular model of coffe machine. The store sels an average of 12 machines each week. Weekly demand follows a normal distribution with variance 9. The store pays $20 for each coffe machine, which it sells for 575 Fixed costs of replenishment amount to $28. The accounting department recommends a 20 percent interest rate for the cost of capital including storage and breakage of each item Replenishment lead time is three months. Assume 1years 48 weeks. Suppose stock out cost and lost of good will can not be estimated, what lot size and reorder level should be used for the come machine with a 90% type 1 service level? Q = 76.32 R: 199.424