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A taxi business operates a fuel depot for its fleet of taxis. The depot operates 365 days per year. Throughout the year, demand for fuel
A taxi business operates a fuel depot for its fleet of taxis. The depot operates 365 days per year. Throughout the year, demand for fuel is normally distributed with an average daily demand of 200 liters and a daily standard deviation (od) of 14 liters. Holding cost for fuel is $1.00 per liter per year, and ordering cost is $50 per order. The lead time to receive a delivery of fuel is two days. a. What is the EOQ for replenishing the depots inventory of fuel (4 marks) b. Based on the EOQ determined in part (a), how many orders per year will be made? (3 marks) c. What is the length of the inventory order cycle in days? (3 marks) d. Determine the reorder point needed if the manager of the depot wants to ensure a lead time service level of 99%. (use Z = 2.33 for 99% of the normal probability distribution)
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