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AQ2. Inventory Management [18 marks] Demand for walnut fudge ice cream at the Sweet Cream Dairy can be approximated by a normal distribution with
AQ2. Inventory Management [18 marks] Demand for walnut fudge ice cream at the Sweet Cream Dairy can be approximated by a normal distribution with a mean of 35 gallons per week and a standard deviation of 8.48 gallons per week. The new manager desires a service level of 94 percent. The Sweet Cream Dairy is open 7 days a week and 52 weeks a year. 1. [6 marks] If the ordering cost S = 200 per order and it is optimal for the Sweet Cream Dairy to order 400 gallons each time, then what is the per unit inventory holding cost H? 2. [6 marks] If lead time is 4 days, what reorder point should be used? 3. [6 marks] If lead time follows a normal distribution with mean 4.6 days and standard deviation days and the reorder point should be set to 36.5 gallons, then what is the value of L?
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