Miller Shoe Co. produces and sells an excellent-quality walking shoe. After production, the shoes are distributed to 20 warehouses around the country. Each warehouse services approximately 100 stores in its region. Miller uses an EOQ model to determine the number of pairs of shoes to order for each warehouse from the factory. Annual demand for Warehouse OR2 is approximately 132,000 pairs of shoes. The ordering cost is $264 per order. The annual carrying cost of a pair of shoes is $2.50 per pair.

1. Use the EOQ model to determine the optimal number of pairs of shoes per order.

2. Assume each month consists of approximately 4 weeks. If it takes 11 week to receive an order, at what point should i warehouse OR2 reorder shoes?

you only need to answer question 3 !

3. Although OR2's average weekly demand is 2,750 pairs of shoes (132,000 / 12 months / 4 weeks), demand each week may vary with the following probability distribution:

Total demand for 1 week	1,700 pairs	2,250 pairs	2,750 pairs	3,050 pairs	3,230 pairs
Probability (sums to 1.00)	0.02	0.10	0.76	0.10	0.02

If a store wants shoes and OR2 has none in stock, OR2 can "rush" them to the store at an additional cost of $3

per pair. How much safety stock should Warehouse OR2 hold? How will this affect the reorder point and reorderquantity?

The relevant total stockout and carrying costs are the________when a safety stock of________

pairs of shoes is maintained. Therefore, Warehouse OR2_______ hold that number as safety stock.

This will_____the reorder point to_______pairs of shoes. The reorder quantity will________