A local gas station is open 7 days per week, 365 days per year. Sales of 10W40 grade premium oil average 10 cans per day with a standard deviation of 4 canes. Inventory holding costs are 1.5$ per can per year. Ordering cost is $20 per order. Lead time is 8 days. In case of stockout, the motorist drives away and the sale is lost. So, the service station requires a service level of 95 %.If the station uses a fixed-quantity inventory management system, what would be the order quantity, the safety stock and the reorder level?If the station uses a fixed-review-period management system with 28 days review interval, what would be the order quantity if the inventory level is 55 cans at the moment of ordering?

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Answered: A local gas station is open 7 days per…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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A local gas station is open 7 days per week, 365 days per year. Sales of 10W40 grade premium oil average 10 cans per day with a standard deviation of 4 canes. Inventory holding costs are 1.5$ per can per year. Ordering cost is $20 per order. Lead time is 8 days. In case of stockout, the motorist drives away and the sale is lost. So, the service station requires a service level of 95 %.

If the station uses a fixed-quantity inventory management system, what would be the order quantity, the safety stock and the reorder level?
If the station uses a fixed-review-period management system with 28 days review interval, what would be the order quantity if the inventory level is 55 cans at the moment of ordering?

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