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Village Furniture Company deals in expensive upholstered sofas. The company has analysed its sales records for a particular style sofa and found that annual sales are 60 units. Cost per purchase order is $50, and the holding charge is $70 per sofa per year. The working days are 360 days with lead time 100 days. As a rule, retailers of upholstered furniture expect their customers to wait for delivery of the particular sofa they want, and very little goodwill is lost because of this. Rarely have Village's customers cancel orders for sofas. The cost of processing, paperwork, and accounting for the backordered sofas is about $20 a unit per year. a) What is the reorder point? [1.39] b) What is cycle time?
