Production and operation management course. (Please answer question number 3 only, question 2 just for referring)

3. The local Toyota dealer from problem is considering installing either a Q or P system for inventory control. The past standard deviation of demand has been 2.5 units per month, and the replenishment lead time is tro months. A 95 percent service level is desired.

a. If a continuous review system is used, what is the value of Q and R that should be used?

b. If a periodic review system is used, what is that mean?

c. What are the pros and cons of using the P system compared to using the Q system for this part?

2. The local Toyota dealer has to decide how many spare shock absorbers of a particular type to order for repairing Toyota automobiles. This shock absorber has a demand of four units per month and they cost $20 each. The carrying charge is 20 percent per year and the ordering cost is $10 per order. a. What is the EOQ for this item? (2 Marks) b. How often will the dealer reorder this part? (2 Marks) c. What is the annual cost of carrying this part? (4 Marks)