Philip's Paint Supply sells interior latex paint in a wide variety of colors. The various colors are
Question:
Philip's Paint Supply sells interior latex paint in a wide variety of colors. The various colors are mixed to order, so Philip Kale (the owner-operator of the store) only needs to carry inventory of a few different tint bases rather than an inventory of every possible color a customer may want to purchase.
Daily demand for semi-gloss light tint base is normally distributed with a mean of 24 gallons and a standard deviation of 4 gallons. The tint base supplier promises delivery of orders in 3 days. Philip's cost for placing an order with the supplier is $65, and he estimates annual inventory carrying cost to be $3 per gallon. Assume that Philip's Paint Supply is open for business every day of the year.
Given this information, Philip wishes to study two inventory management approaches. He seeks your help in developing a fixed-quantity inventory policy and a fixed-period inventory policy.
a) Please prepare, and express carefully including any assumption that you make, a fixed-quantity inventory policy for the situation described above.
b) Please prepare, and express carefully, a fixed-period inventory policy for the situation described above. Assume that the order interval has been set as 13 days.
c) Did you notice that the cost of a gallon of light tint base is not mentioned in this problem? Why is it not a factor in this analysis? Five sentences or less, please!