Airlines has an agreement to buy jet fuel from exxon

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Reference no: EM131805937

United Airlines has an agreement to buy jet fuel from Exxon. The goal is to minimize total cost (i.e., ordering cost + holding cost). The annual demand for fuel is 42,000 barrels. Exxon charges United $3500 to process each order. United incurs a holding cost of $23 per barrel.

The standard deviation of daily demand is 14 barrels per day. What is the inventory level (re-order point) at which United needs to place an order if the lead time for orders is 13 days and the desired service level is 95% (hint: there is a z-table calculator in Moodle)?

Reference no: EM131805937

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