Kelly's Service Station Does a Large Business in Tune-Ups

question 40

Essay

Kelly's Service Station does a large business in tune-ups. Demand has been averaging 210 spark plugs per week. Holding costs are $.01 per plug per week and reorder costs are estimated at $10 per order.
Kelly does not want to be out of stock on more than 1% of his orders. There is a one-day delivery time. The standard deviation of demand is five plugs per day. Assume a normal distribution of demand during lead time and a 7-day work week.
a.
What inventory policy do you suggest for Kelly's station?
b.
What is the average amount of safety stock for the reorder point in (a)?
c.
What are the total variable weekly costs including safety stock costs?

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A method of persuasion that uses logical arguments and factual evidence to convince others, often employed in advertising and speeches.

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A medical professional who is male, trained and licensed to practice medicine, often specializing in specific areas of health care.

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The systematic investigation of societal patterns, relationships, and cultural norms through various methods such as surveys, observations, and analysis.