What is good value for the production order size

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Reference no: EM132290923

ZQ Fishing creates novelty singing fish that can be hung on household walls. Each singing fish costs $4 to make and distribute and sells for $15. The holding costs consist of a 25% yearly interest rate on item costs. The lead time for a production order is 2 weeks and it costs $150 to setup the machinery to create a batch of singing fish. The demand during the two week lead time is normally distributed with mean 25 and standard deviation 8. Backorders cost ZQ Fishing $20/unit/year.

1. What is a good value for the production order size (Q)?

2. What is a good value for the reorder point (r)?

Reference no: EM132290923

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