What is the reorder point that it should be using in this case?

b. When DDL renegotiates its contract with the supplier, what lot size should it write into the agreement?

c. How much of a penalty in terms of setup, holding, and stock-out cost is DDL paying for contracting to buy too large a lot?

d. DDL’s president is uncomfortable with the $400 stock-out cost and decides to substitute a 99 percent fill rate criterion. If DDL used a lot size equal to the EOQ, what would its reorder point be in this case? Also, find the imputed cost of shortage.