solution

.Demand for walnut fudge ice cream at the Sweet Cream Dairy can be approximated by a normal distribution with a mean of 20 gallons per week and a standard deviation of 6.7 gallons per week. The new manager desires a service level of 90 percent. Lead time is two days, and the dairy is open seven days a week. (Hint: Work in terms of weeks. Round your final answer to 2 decimal points).

* Each gallon costs $5

* Every order has a fee of $2

* Holding costs are 10% the cost of inventory

* And a lost sale is valued at $1.20

A. If an ROP model is used, what ROP would be consistent with the desired service level? ROP =

B. How many gallons of ice cream is the manager expecting to be short a year?

C. What is the total annual cost of inventory expected with the following assumptions?

D. Suppose the manager decides to switch suppliers to a lower cost supplier that only charges $1.50 per order but is less reliable. What is the new ROP and total annual cost of inventory if the lead time is now 3 days with a standard deviation of 1 day?