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Hal Itosis is a candy wholesaler. He purchases cases of Altoids mints from a distributor at $20 each and pays a fixed $2,420 shipping and handling charge per order. The total lead time from the distributor is 3 weeks. Assume an annual rate of 30% for inventory carrying charges and 50 weeks per year. Weekly demand is normally distributed with a mean of 3,000 cases and a standard deviation of 124 cases. Assume full backorders.
1) What is the optimal order quantity?
2) Suppose that Hal Itosis' optimal service level is 99%. What is the optimal reorder point?
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