Lecture Exercise #10 Krista's Koffee sells coffee at a fairly steady rate of 2500 pounds per year. The fixed ordering (set-up) cost is $50 per order and the holding costs are $0.50 per pound per year. The lead time is 1 week and weekly demand is determined to be normally distributed with mean =2500/52=48 and standard deviation =10. 1. What is the optimal order quantity Q ∗
? 2. What is Krista's ROP assuming that Krista is willing to accept a stockout risk of no more than 3% ? (i.e. service level is 97% ) 3. If she is willing to accept a stockout risk of no more than 5%, what should the ROP be?