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An automotive warehouse stocks a variety of parts that are sold at neighborhood stores. One particular part, a popular brand of oil filter, is purchased

An automotive warehouse stocks a variety of parts that are sold at neighborhood stores. One particular part, a popular brand of oil filter, is purchased by the warehouse for $150 each. It is estimated that the cost of order processing and receipt is $100 per order. The company uses an inventory carrying charge based on a 28 percent annual interest rate. The monthly demand for the filter follows a normal distribution with mean 280 and standard deviation 77. Order lead time is assumed to be five months. Assume. that if a filteris demanded when the warehouse is out of stock, then the demand is backordered, and the cost assessed for each back-ordered demand is $12.80. Determine the following quantities:
a. What policy should Bobbi use if the stock-out cost is replaced with a Type 1 service objective of 95 percent?
b. What policy should Bobbi use if the stock-out cost is replaced with a Type 2 service objective of 95 percent? (You may assume an EOQ lot size.)
c. Find the reorder level that should be used in order to satisfy 99 percent of customer demands for the part.
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