The home appliance department of a large department store is using a lot size reorder point system to control the replacement of a particular unit. The store sells an average of 15 units each week. Weekly demand follows a normal distribution with variance of 36 units per week. The store pays $20 for each unit. Fixed cost is $35 per order. The accounting department recommends a 20% interest rate per year for the cost of capital for the holding cost. If a customer demands the item when is out of stock, the customer will generally go elsewhere. Penalty costs are estimated to be about $35 per unit. Replenishment lead time is three months. Assume 1 year = 52 weeks

a) Transform demand in units per year. Find (Q,R) optimal values after 3 iterations (0, 1,1, 2,2,3,3) .

b) Calculate total cost