Response to the following problem:
Scanlon Plumbing Corporation distributes American Consolidated lavatories. Demand for the basic China White Oval Model 2634 averages 19 units a week. The lavatories cost Scanlon $22.50 each and sell for $35.75. Unfortunately, approximately 5 % of the lavatories ordered by Scanlon are either defective or damaged during shipment. Therefore, Scanlon needs 20 (= 19/.95) units a week to meet its demand.
The company uses a periodic review policy with American Consolidated and orders once every four weeks. Lead time for delivery is two weeks, and Scanlon desires a safety stock of 50 units. If the inventory level of the lavatories at the time of the next order is 35 units, determine the optimal inventory policy.