You are the manager of the Manero Paint store, large paint outlet

Finance Jan 19, 2021

You are the manager of the Manero Paint store, large paint outlet. One big demand item is color Number 107 (passion fire) latex paint in one-gallon containers. Manero paint sells 10000 containers of this paint every year. Demand is normally distributed with a standard deviation of 2000 units. Passion fire costs 7.50$ per container. The lead time from order to delivery is 10days with a standard deviation of 3 days. Holding costs are 16% per year and the fixed costs of placing an order are 80$. if Manero Paint stocks out of Passion Fire, It incurs 500$ in stockout costs. The replenishment rate is infinite. Use a a360 day year.
The calculation shows that The EOQ is 1155 containers and the Optimum safety stock is 162 containers.

a. Calculate the cost of this Inventory Strategy per year.

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