The B&S Novelty and Craft Shop in Bennington, Vermont, sells a variety of quality handmade items to tourists. B&S will sell 300 hand-carved miniature replicas of a Colonial soldier each year, but the demand pattern during the year is uncertain. The replicas sell for $20 each, and B&S uses a 15% annual inventory holding cost rate. Ordering costs are $5 per order, and demand during the lead time follows a normal probability distribution with µ = 15 and σ = 6.

a. What is the recommended order quantity?

b. If B&S is willing to accept a stock-out roughly twice a year, what reorder point would you recommend? What is the probability that B&S will have a stock-out in any one order cycle?

c. What are the safety stock and annual safety stock costs for this product?