dolution

The manager of a car wash received revised price from the vendor who supplies soap: New price of the soap is $15 a gallons. Annual usage of the soap is 28,000 gallons. The car wash is open 350 days a year. Assume that daily usage is normal with a standard deviation of 10 gallons per day. The lead time is normal with a mean of 9 days and a std. dev. of 3 days. The ordering cost is $157.50 per order and annual carrying cost is 30% of the price of the soap. Presently the company maintains an order size of 2000 gallons. – a) What penalty is the car wash company incurring by its present order size? (3 points) – b) If the company takes 5% acceptable risk of stock-out then find the appropriate safety stock level. (2 points) – c) What is the probability that the supply of the soap will be exhausted before the order is received if soap are reordered when the amount on hand drops to 850 gallons? (3 points) – d) If the vendor is willing to offer a discount of $120 per order for ordering 2800 units, would you advise the manager to take advantage of the offer?