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A retailer sells the Ultra-Man toy robot. The demand for the product follows a normal distribution with a mean of 15 units per day and a standard deviation of 5 units per day.
The unit cost of the product is $60, the ordering cost is $50 with a four (4) day lead time, and the annual storage cost is $10 per toy. The retailer operates 312 days per year (six days per week).
(a) Now assume that the firm decides to adopt the continuous revision inventory system and wishes to contain the risk of shortage to no more than 6%. Calculate the reorder point.
Could you please explain the answer.
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