3 We are given the following information about a product:

Cost of placing an order  $100 Cost per item  $5 Sale price per item  $8 Annual holding cost  40% of cost of item Annual demand  5,000 units Lead time demand  N(20, 900)

a If the reorder point that minimizes expected cost is 80, what is the shortage cost? (Assume backlogging.)

b If the reorder point that minimizes expected cost is 80, what is the shortage cost? (Assume lost sales.)

c What reorder point would meet 90% of all demand on time?

d What reorder point would result in a stockout occurring during an average of 0.5 lead time per year?