# What happens to the reorder point when the standard deviation of demand changes?

For the data given in problem 8: a. Design a P system for this phone with a 92 percent service level. b. Compare the inventory investments required for the P and Q systems (from problem 8) for various values of service level. c. Why does the P system require a higher inventory investment? problem 8 An electronics retailer carries a particular cellular telephone with the following characteristics: Average monthly sales = 120 units Ordering cost = \$25 per order Carrying cost = 35 percent per year Item cost = \$300 per unit Lead time = 4 days Standard deviation of daily demand = .2 unit Working days per year = 250 a. Determine the EOQ. b. Calculate the reorder point for a 92 percent service level, assuming normally distributed demand. c. Design a Q system for this item. d. What happens to the reorder point when the lead time changes? What happens to the reorder point when the standard deviation of demand changes?

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