A local service station is open 7 days per week, 365 days per year. Sales of 10W40 grade premium oil average 25 cans per day. Inventory holding costs are $0.75 per can per year. Ordering costs are $9 per order. Lead time is 1.5 weeks. Backorders are not practical - motorists drive away.

1. Assuming deterministic demand, calculate the economic order quantity and reorder point.

EOQ = ___________ cans

ROP = ____________ cans

2. The boss is concerned about this model because demand varies. The standard deviation of demand was determined from a data sample to be 2.5 cans per day. The manager wants a 95% service level. Determine a new inventory plan (i.e., EOQ and ROP) based on this information.

EOQ = ___________ cans

ROP = ____________ cans