A retail electronic-supply outlet orders once every 2 weeks. For a particular item with unit value (v) of $3, it is felt that there is a cost of $1 for each unit demanded when out of stock.

Other characteristics of the item are L = 1 week r = 30% per year

a. Consider a period of the year where xˆ1 = 30 units and MSE1 = 6 units (where the unit time period is 1 week). What order-up-to-level S should be used? (Assume

σt = σ1t 1/2.)

b. Suppose the average demand rate changed slowly throughout the year. Suggest a reasonable way for the retailer to cope with this situation.