15.16. To limit dependence on imported oil, the Four Corners Power Company has decided to cover a fixed part of the regional demand for electricity by using coal. The annual demand for coal is estimated to be 500,000 tons, which are used uniformly throughout the year. The coal can be strip-mined near the power-generating plant and delivered with a setup requiring 2 days for a cost of $2,000 per mining run. Holding coal in inventory costs approximately $3.00 per ton per year.

a. Determine the economic order quantity for coal.

b. Assume the daily demand for coal is distributed normally, with mean of 2,000 tons and standard deviation of 500 tons. What quantity should be set as safety stock to guarantee a 99 percent service level?