What are optimal lot sizes and reorder point for tortellini

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Hy-Vee uses a (Q, R) inventory system to control its stock levels. For a 12-ounce bag of Barilla three-cheese tortellini, historical data show that the distribution of monthly demand is approximately normal, with a mean of 28 and a standard deviation of 8. Replenishment lead time for the tortellini is about 14 weeks. Each bag of tortellini costs the store $6. Although excess demands are backordered, the store owner estimates that unfilled demands cost about $10 each in bookkeeping and loss-of-goodwill costs. Fixed costs of replenishment are $15 per order, and holding costs are based on a 30% annual interest rate. a. What are the optimal lot sizes and reorder point for the tortellini? b. What is the optimal safety stock for the tortellini?

Reference no: EM131230316

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