[Solved] A Local Service Station Is Open 7 Days Per Week

Question 61
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A local service station is open 7 days per week, 365 days per year. Sales of 10W40 grade premium oil average 20 cans per day. Inventory holding costs are $0.50 per can per year. Ordering costs are $10 per order. Lead time is two weeks. Backorders are not practical-the motorist drives away.
a. Based on these data, choose the appropriate inventory model and calculate the economic order quantity and reorder point. Describe in a sentence how the plan would work. Hint: Assume demand is deterministic.
b. The boss is concerned about this model because demand really varies. The standard deviation of demand was determined from a data sample to be 6.15 cans per day. The manager wants a 99.5 percent service probability. Determine a new inventory plan based on this information and the data in part ( a ). Use Q opt from part ( a ).

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