Reference no: EM132305539

The ePaint Store stocks paint in its warehouse and sells it online on its Internet Web site. The store stocks several brands of paint; however, its biggest seller is Sharman-Wilson Ironcoat paint, which has an estimated annual demand of 10,000 gallons of paint, an annual carrying cost of $0.75 per gallon, and an ordering cost of $150 per order. The company processes orders every day except on Sundays (i.e. 365-52 = 311 days). Assume that daily demand for Ironcoat paint is normally distributed with an average daily demand of 30 gallons and a standard deviation of 5 gallons of paint per day. The lead time for receiving a new order of paint is 10 days. The store wants to maintain a service level of 95%. Suppose that the company wants to switch to a Periodic Order System (i.e. the data are the same as Q-system above).

1. Calculate the period (in work-days, rounded up to the nearest day) that gives approximately the same number of orders per year as the EOQ.

2. What is the Target Inventory Level?

3. If On-Hand Inventory is 200 gallons, and there are no open orders or back orders, how much should be reordered? Explain your reason.