Question
The daily demand for motor oil at Cullowhee Motor Repairs is normally distributed with a mean of 26 gallons and a standard deviation of 10
The daily demand for motor oil at Cullowhee Motor Repairs is normally distributed with a mean of 26 gallons and a standard deviation of 10 gallons. The lead time for receiving an order of motor oil from its distributor is 4 days. Because this is the only motor repair shop in Cullowhee, the manager is interested in maintaining only a 85% service level. Each time an order is placed, the manager order 150 gallons of motor oil a) How much safety stock should be used for a 85% service level? b) What is the reorder point for the 85% service level? c) If the manager increases the service level to 97.5% - how much safety stock should be used for this service level d) What is the reorder point for the 97.5% service level? e) If the carrying cost per year is $2/unit/year - what is the additional cost associate with the 97.5% service level compared to 85% service level?
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