25 Adistributor of large appliances needs to determine the order quantities and reorder points for the various products it carries. The following data refer to a specific refrigerator in its product line:

Consider an even daily demand and a 365-day year.

a. What is the economic order quantity?

b. If the distributor wants a 97 percent service probability, what reorder point, R, should be used?

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Cost to place an order Holding cost Cost of refrigerator Annual demand Standard deviation during lead time Lead time $100 20 percent of product cost per year $500 each 500 refrigerators 10 refrigerators 7 days