Consider an item with the following characteristics:

D = 1,000 units/year L = 4 weeks A = $20 v = $5 per unit r = 0.20 $/$/year xˆL = 80 units

σL = 8 units B2 = 0.8

a. Use the approach of Lau and Lau in Section 6.7.14 to find the optimal order quantity.

Then find Fx(s). Finally, assume that demand is normal, and find k and s.

b. Use the approach of Section 6.7.6 to find the optimal s and Q.