Waterloo Warehouse Ltd. (WWL) acts as a distributor for a product manufactured by Norwich Company. WWL uses an (s, Q) type of control system. Demands on Waterloo can be assumed to be unit sized. Norwich has a particular way of delivering the quantity Q:

They deliver Q/2 at the end of the lead time of 1 month and the other Q/2 at the end of 2 months. Assume that this business has the following characteristics:

Q = 100 units s = 40 units

σ1 = 10 units (σ1 = the standard deviation of forecast errors over 1 month)

D = 360 units/year