Question: 9 . A retailer has four store locations A , B , C , and D . Each store orders from an external supplier based

9. A retailer has four store locations A, B, C, and D. Each store orders from an external supplier based outside the city. Table 1 contains information about the daily demand at each location and the monthly rental cost. Each store uses a periodic review model. They order once in 10 days, the product is received 2 days later, and the service level is 99%. The retailer wants to consolidate by closing the 4 stores and opening a new store at a central location E. The estimated demand at location E and the rental cost is also in Table 1. The new location will continue to order once in 10 days, the lead time will remain 2 days, and the service level will continue at 99%.
Location Daily Demand Average Standard Deviation of Daily Demand Rental Cost (Monthly)
A 10060 $3,600
B 200100 $4,800
C 300120 $6,000
D 7550 $3,600
E 660160 $11,400
Transportation costs from the supplier to the store are approximately the same for each of the 5 locations (A, B, C, D, and E) at $0.25/ Unit. The retailer purchases each unit for $50 and sells for $75. Cost of holding a unit in inventory is $2/ month. The retailer expects to save $7,500/ month in overhead and labor costs by reducing the number of locations. Assume that there are 30 days in a month.
a. What is the average inventory level at Store A?

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