A local service station is open seven days per week, 365 days per year. Sales of 10W40 grade premium oil average 20 cans per day. Inventory stock costs are $0.50 per can per year. Ordering costs are $10 per order. Lead time is two weeks and Backorders aren't practical-the motorist
drives away.

a. Based on these data select the appropriate inventory model as well as calculate the economic order quantity and reorder point. Define in a sentence how the plan would work. Clue Assume demand is deterministic.

b. The boss is concerned about this model for the reason that demand really varies. The standard deviation of demand was dogged from a data sample to be 6.15 cans per day. The manager needs a 99.5 percent service probability. Conclude a new inventory plan based on this
information and the data in a.