Using a computerired Inventory Management System, a Paint Supply Store franchise continuously monitors the inventory of all the paint located at each of their 15 stores and their distribution warehouse. The Paint Supply Store franchise sells an average of 42 gallons of Orange Paint every week for 52 weeks per year). They purchase Orange Paint from their supplier at a price of $2.50 per gallon. (The company does not hold Safety Stock) It takes 1.50 weeks to receive an order from the supplier. Administrative costs for Ordering paint have been estimated to be $20 per order. Holding Costs -25% of the purchase price per gallon per year. At what inventory level should the company place an order? Reorder Point, ROP = L + SS Service Level z Value 99.99% 3.719 d = Average Demand Rate per Time Period 99.90% 3.090 D = Demand Rate per Year 99.00% 2.326 95.00% 1.645 L = Average Lead time (time periods) 90.00% 1.282 SS = Safety Stock = zoal 85.00% 1.036 80.00% 0.842 OaL LOG (Assuming Lead Time is constant as in Periodic review) 0 - Standard Deviation of the demand z = Number of Standard deviations corresponding to a service level Q = Order Quantity Average Inventory Level = 0/2 + SS H Holding Cost Per Year Per Unit S=Ordering/Setup Cost Per Order Total Annual Inventory Cost = ) H+ s +H(SS) Economic Order Quantity, EoQ = 12.5 Time Between Orders = TBO= D = Demand Rate per Year L = Average Lead time (time periods) SS = Safety Stock = Z OL 2.326 1.645 99.00% 95.00% 90.00% 85.00% 80.00% 1.2 1.030 0.842 al = JL oz (Assuming Lead Time is constantas in Periodic review) 04 Standard Deviation of the demand 2 = Number of Standard deviations corresponding to a service level Q = Order Quantity Average Inventory Level = Q/2 + SS H = Holding Cost Per Year Per Unit S = Ordering/Setup Cost Per Order Total Annual Inventory Cost Cost = (%) + + s + H(SS) Time Between Economic Order Quantity, EOQ = Orders = TBO E EO A. 3276 gallons of paint B. 52 gallons of paint C.1638 gallons of paint D.21 gallons of paint E. 63 gallons of paint