Question: Daily demand for packages of five videotapes at a warehouse store is found to be normally distributed with mean 50 and standard deviation 5. When the store orders more tapes, the ordering cost is $42 and the orders take 4 days to arrive. Each pack of tapes costs $7.20 and there is a 24% annual holding cost for inventory. Assume the store is open 360 days a year. Place answers on lines provided.
1) What is the EOQ?
2) If the store wants the probability of stocking out to be no more than 5%, and demand each day is independent of the day before, what reorder point should be set?
3) How much of your reorder point in part "2" is safety stock?