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A drugstore opens everyday (365 days a year). The manager has to order 100-pill Advil, which costs this store $3 a unit and requires a 5-day lead time for replenishment of stock. The drugstore uses a 20 percent annual interest rate to compute holding costs and place an order with a cost of $15. Based on what the manager estimates, daily demands show that the store sells an average of 50 units and the standard deviation of demand is 5. Assume that demand is described by a normal distribution.
a) What is the EOQ?
b) What ROP will provide a lead time service level of 97%?
c) What is the expected number of units short per year with a 97% service level?
d) What is the annual service level (fill rate)?
(Please type the answers in details)
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