The manager of a car wash received a revised price list from the vendor who supplies soap, and a promise of a shorter lead time for deliveries. Formerly the lead time was four days, but now the vendor promises a reduction of 25 percent in that time. Annual usage of soap is 4,500 gallons. The car wash is open 360 days a year. Assume that daily usage is normal, and that it has a standard deviation of 2 gallons per day. The ordering cost is $30 and annual carrying cost is $3 a gallon. The revised price list (cost per gallon) is shown in the following table: Quantity 1 - 399 400 - 799 800 + Unit Price $2.00 1.70 1.62 Click here for the Excel Data File a. What order quantity is optimal? (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole number.) Optimal order quantity ROP b. What ROP is appropriate if the acceptable risk of a stockout is 1.5 percent? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) gallons gallons

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
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The manager of a car wash received a revised price list from the vendor who supplies soap, and a promise of a shorter lead time for
deliveries. Formerly the lead time was four days, but now the vendor promises a reduction of 25 percent in that time. Annual usage of
soap is 4,500 gallons. The car wash is open 360 days a year. Assume that daily usage is normal, and that it has a standard deviation of
2 gallons per day. The ordering cost is $30 and annual carrying cost is $3 a gallon. The revised price list (cost per gallon) is shown in
the following table:
Quantity
1 - 399
400 799
800 +
Unit Price
$2.00
1.70
1.62
Click here for the Excel Data File
a. What order quantity is optimal? (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole
number.)
Optimal order quantity
ROP
b. What ROP is appropriate if the acceptable risk of a stockout is 1.5 percent? (Do not round intermediate calculations. Round your
final answer to 2 decimal places.)
gallons
gallons
Transcribed Image Text:The manager of a car wash received a revised price list from the vendor who supplies soap, and a promise of a shorter lead time for deliveries. Formerly the lead time was four days, but now the vendor promises a reduction of 25 percent in that time. Annual usage of soap is 4,500 gallons. The car wash is open 360 days a year. Assume that daily usage is normal, and that it has a standard deviation of 2 gallons per day. The ordering cost is $30 and annual carrying cost is $3 a gallon. The revised price list (cost per gallon) is shown in the following table: Quantity 1 - 399 400 799 800 + Unit Price $2.00 1.70 1.62 Click here for the Excel Data File a. What order quantity is optimal? (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole number.) Optimal order quantity ROP b. What ROP is appropriate if the acceptable risk of a stockout is 1.5 percent? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) gallons gallons
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