The home appliance department of a large department store is using inventory models to control the replenishment of a particular model of Microwave ovens. The store sells an average of 25 ovens each week. Weekly demand follows a normal distribution with standard deviation of 7. The store pays $100 for each oven. Fixed costs of replenishment are $28. The counting department recommends a 20% annual interest rate for the cost of capital. Assume that the lead time is one week (4weeks each month and 48 weeks each year).
a) What is the EOQ?
b). What is the reorder point if a fill rate of 99% is desired?