Q1: Monthly demand for an inventory item is a normally distributed random variable with a mean of 30 units and a standard deviation of 2. Demand follows this distribution every month, 12 months a year. When inventory reaches a predetermined level, an order for replenishment is placed. The fixed ordering cost is $60 per order. The items cost $4 per unit, and the annual inventory holding cost is 25 percent of the average value of the inventory. The replenishment lead time is exactly 4 months.
Determine the necessary EOQ and reorder point to achieve a 90 percent service level.
a. 170; 85
b. 208; 126
c. 170; 84
d. 208; 85