Abilene Auto Parts, a retailer of general maintenance and after-market automotive products, desires to re-build their brand around service and availability. Traditionally, they have committed to having parts in stock for their customers 80% of the time. Use the date below to determine:

Baseline Information:

average daily demand = 10 units/day (store operates 360 days/year)

standard deviation of demand = 3 units/day

average lead time = 6 days

standard deviation of lead time = 2 days

item cost to AAP = $20/unit

annual holding cost = 25% of cost of product

ordering cost = $75/order

cycle-service level = 80%

To support the re-branding effort, the VP of marketing at Abilene has asked you to determine the incremental costs of increasing the cycle-service level to 99%. Given the information below regarding replacement headlight bulbs, determine

Question: The difference in TOTAL annual cost of the replacing the 80% policy with one calling for a 99% service level (i.e., the incremental costs asked for by the VP of marketing)?

Question: Their current re-order point (ROP) using the 80% service level?