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 cost are S0.5 per can per year Ordering costs are sioben Inventory Ordering costs are $10 per order. Lead time is two weeks. Backorders are not practical the motorist drivers away
(a) Currently it is assumed by the manager that demand is deterministic. Choose the optimal order quantity and reorder point.
(b) The manager becomes concerned because demand really varies. The standard deviation of demand during the lead time was determined from a data sample to be 24 cans. Determine the new reorder point for a service level of 95%.