Question: Daily demand for Cool Wheels, a popular toy, is normally distributed with a daily mean of 60 cases and a standard deviation of 8 cases. Supply is virtually certain, with a lead time of three days. The cost of placing an order is $6, and annual holding costs are 15 percent of the unit price of $24.00. We want a 90 percent service level for customers who place orders during the reorder period. The Cool Wheels factory operations 250 days per year. We are currently ordering 100 cases at a time.

a. How many cases do you recommend ordering at a time? How often?

b. How does the annual cost of your recommendation compare with the current approach?