Assume an inventory control system for an independent demand item where the Lead-time is 4 days and the Review Period is 15 days. The expected demand for the end-item is 20,000 units per year.

Q#1. Now assume that the manager wants to achieve a cycle service level of 95% in her P system and she knows that the demand during the protection period is normally distributed. She can also assume the following: average daily demand is 10 units; ordering cost is $50.00; holding cost is $4 per unit per year; lead-time is 4 days and the review period is 15 days. Assume 250 days in a year.

a)It is possible to calculate the value of an optimal review period based on the economics of EOQ. In this case, the optimal review period turns out to be 15 days.

b)The reorder point, R, cannot be calculated from the above given information because we do not know the nature of the distribution of demand during the protection period.

c)Assuming that the distribution of demand during the protection period is normally distributed, we can calculate both the EOQ and the Target level, T, by using the P value of 15 days. But it will not yield the optimal value of T.

d)All of the above are false.

e)Only (a) and (c) are true.