4. The annual demand for the bolt-nut package for the aircraft manufacturer Excel database Purchase Orders (see Example 1.3 in Chapter 1) is 60,000. The fixed cost of placing an order is $50, and the unit cost of the item is $3.95. The company uses an annual carrying charge of 15%.

a. Use the Economic Order Quantity Model spreadsheet and Solver to find the optimal order quantity.

b. If the demand is lognormally distributed with a mean of 60,000 and a standard deviation of 4500, what is the distribution of lead-time demand?

c. What reorder point should be used to ensure a probability of running out of stock of at most 10%?