Problem: HG's clothes sells a number of white dress shirts. The shirts which bear the store label, are shipped from a manufacturer in New York City. Hi, the proprietor says: "I want to be sure that I never run out of dress shirts. I always try to keep at least two months of supply in stock. When my inventory drops below that level, I order another two month's supply. I have been using this method for 20 years and it works". The shirts cost $8 and each sell for $25. The cost of processing an order and receiving new goods amounts to $80 and the replenishment lead time is one month. Monthly demand is approximately distributed with mean 120 and standard deviation 60. Monthly average of 120 units is used as forecast. Assume a 15% annual holding cost rate.