Suppose a distributor faces an annual demand for a car horn
for small cars that is normally distributed with a mean of 2300 items and a
standard deviation of 300. The cost of placing an order is $150 and the holding
cost is $10/item/year. The replenishment lead time is 9 days (assume 352 days
in a year). Answer the following:
a. Compute the economic order quantity (EOQ).
b. If a service level of 5% is desired, what should R be in
the (Q, R) model?
c. For your answer to part (b), what is the average cycle,
safety, and pipeline stock equal to?