25. The manager of a car wash received a revised price list from the vendor who supplies soap, and… 1 answer below »

25.        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 ven- dor 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

Unit Price

1–399

$2.00

400–799

1.70

800 +

1.62

a.    What order quantity is optimal?

b.   What ROP is appropriate if the acceptable risk of a stockout is 1.5 percent?

 

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