Question 1: The local convenience store wants to place abeverage on a continuous review inventory replenishment policy. Thedemand on average is 15 cases per month. It costs 5 dollars toplace an order. The cost per case of the beverage is 12 dollars.The interest rate per week is 0.5% per week per case. The lead timefor every order is 2 weeks. Demand is 15 cases per month andstandard deviation is 2.7 a) ( Use EOQ to calculate the orderquantity. b) Using the order quantity from part (a), calculate thereorder point that will make the fill rate at least 90%. Computethe resulting average inventory cost. c) Using the order quantityfrom part (a), calculate the reorder point that makes the type-Iapproximation of fill rate to be at least 90%. Compute the truefill rate and inventory level resulting from the reorder point andcompare to the values in part (b). What does this say about theaccuracy of the type I service approximation?
