Question-3 (30 pts)

The number of laptops sold each week by large electronics discount store is normally

distributed with a mean of 50 units and a standard deviation of 10 units. The holding cost of a

laptop is about $85 per year. Ordering costs are $100 per order. The Taiwanese supplier of the

laptops provides a lead time of 2 weeks. Assume that the store is open all year round.

(Each question below is worth 5 points)

a. What is the economic order quantity (EOQ) for this laptop?

b. What is the total annual holding plus ordering cost for this laptop?

c. The VP of Marketing has specified a 99% service level for these laptops. What should the

reorder point (ROP) be to achieve this service level?

d. What is the safety stock needed to attain the 99% service level?

e. If management decides that a 95% service level is acceptable, what are the new ROP

and the new safety stock?

f. Because of a strike supplier lead time increases to 4 weeks for the foreseeable future.

What are the new ROP and the new safety stock for a 99% service level?