The company sells motors at a rate of 1500 units per year with a standard deviation of demand of 150 units per year. Lead time to acquire more inventory is 0.08 years with a standard deviation of lead time of 0.02 years. Each motor costs $692.50 and Finance uses a 30% carrying cost of inventory. The cost to order a shipment of motors from their supplier is $250 and the company pays transportation charges of $40 per motor. If the company runs out of inventory, the manager estimates it costs the company $1000 so the company would like to maintain a 90% in stock level during lead time.
1. If the company were to use a Reorder Point (EOQ) policy to manage the inventory of motors, the inventory policy would be to order _________ motors when inventory drops to ________ motors. (2 points for each blank)
2. If the company were to use a Periodic Review Policy to manage the inventory of motors, the inventory policy would be to order _________ motorsevery ________ days. Use I to represent the current inventory of motors. (2 points for each blank. Make sure the second blank is in “days”.)