You are in charge of managing the inventory for a distributor of kitchen appliances based in Maine. The food processor 6-J-5 is the company's bestseller, with annual demand of 4712 units and a purchase cost of $8 per unit. You must pay $25 to process each order and the lead time from the vendor is 4 weeks. You take ownership of the items upon placing the order. The annual RMSE of the forecast is 785 units and your firm uses a holding cost of 0.16 $/$/yr. Assume 52 weeks per year. You currently manage this product using a continuous review (s,Q) policy.
What order quantity (Q) do you recommend?
