B&S Novelty andCraft Shop sells a variety of quality handmade items to tourists. B&S willsell 300 hand-made carved miniature replicas of a Colonial soldier each year,but the demand pattern during the year is uncertain. The replicas sell for $20each, and B&S uses a 15% annual inventory holding cost rate. Ordering costsare $5 per order, and demand during the lead time follows a normal probabilitydistribution withm = 15 ands = 6.
a. What is the recommended order quantity?
b. If B&S is willing to accept astockout roughly twice ayear, what reorder point would you recommend? What is the probability thatB&S will have astockout in any oneorder-cycle?
c. What are the inventory holding andordering costs?