Question: Rainbow Colors paint store uses a ( Q , R ) inventory system to control its stock levels. For a popular eggshell latex paint, historical

Rainbow Colors paint store uses a (Q,R) inventory system to control its stock levels. For a popular eggshell latex paint, historical data show that the distribution of monthly demand is approximately Normal, with mean 28 and standard deviation 8. Replenishment lead time for this paint is about 14 weeks. Each can of paint costs the store $6. Although excess demands are backordered, each unit of stockout costs about $10 due to bookkeeping and loss-of-goodwill. Fixed cost of replenishment is $15 per order and holding costs are based on a 30% annual interest rate. What is the optimal lot size (order quantity) and reorder level? What is the expected inventory level (safety stock) just before an order arrives?

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