Question: Daily demand of car batteries in Best Auto Mart (BAM) is normally distributed with a mean of 15 and a standard deviation of 10. BAM opens 365 days a year. Its replenishment lead time follows a normal distribution with a mean of 5 days and a standard deviation of 2 days. The inventory holding cost at BAM is $17 per battery per year. The fixed ordering cost is $315 per order. BAM targets a cycle service level of 97.75% [F-1 (0.9775,0,1)=2]. It uses a periodic review policy.
How often should BAM review its inventory?
On average, what is the yearly inventory holding cost incurred by BAM?