Gregg Olson stocks an important but slow-moving item in his variety store. The relevant data are the following. Demand is 8 per year on average, and the variance of lead time demand is roughly equal to the mean of lead time demand.

v = $400/unit A = $5 r = 0.25/year B2 = 0.6 L = 2 weeks = 1/26 year

a. What (s, Q) policy should Gregg use?

b. If the methods of Chapter 6 are used, what (s, Q) policy would Gregg use?