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 $0.60 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, calculate the economic order quantity and reorder point. Hint: Assume demand is deterministic. (Round your answers to the nearest whole number.)
Economic order quantity cans
Reorder point cans
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 5.00 cans per day. The manager wants a 95 percent service probability. Determine a new inventory plan based on this information and the data in a. Use Qopt from a. (Use Excel's NORMSINV() function to find the correct critical value for the given α-level. Do not round intermediate calculations. Round "z" value to 2 decimal places and final answer to the nearest whole number.)
New reorder point cans