A distributor of large appliances needs to determine the order quantities and reorder points for the various products it carries. The following data refer to a specific refrigerator in its product line:

Cost to place an order $100/order Holding cost 20 percent of product cost per year Cost of refrigerator $500/unit Annual demand 500 units Standard deviation of demand during lead time 10 units Lead time 7 days Consider an even daily demand and a 365-day year.

a. What is the economic order quantity?

b. If the distributor wants a 97 percent service probability, what reorder point, R, should be used?1002W