The demand for a product in a UPS warehouse follows a normal distribution , for which the mean is 1,000 units per month and the standard deviation is 200 units per month. The lead time is 0.25 month for the warehouse. The product is valued at $80 per unit in the warehouse. The ordering cost is $20 and the inventory carrying cost is set at 2% per month. A service level of 85% is required during the lead time. The out-of-stock cost is $10 per unit. Assuming the manager in this warehouse uses Re-Order point inventory control policy.

As a result of adopting this policy, what is the average number of products running out of stock EACH YEAR?

As a result of adopting this policy, what is the annual out-of-stock cost for the warehouse?