An automotive warehouse stocks a variety of parts that are sold at neighborhood stores. One particular part, a popular brand


An automotive warehouse stocks a variety of parts that are sold at neighborhood stores. One particular part, a popular brand of oil filter, is purchased by the warehouse for $1.50 each. It is estimated that the cost of order processing and receipt is $105 per order. The company uses an inventory carrying charge based on a 28 percent annual interest rate. The monthly demand for the filter follows a normal distribution with mean 280 and standard deviation 77. Order lead time is assumed to be five months. Assume that if a filter is demanded when the warehouse is out of stock, then the demand is back-ordered, and the cost assessed for each back-ordered demand is $12.80. Suppose that the stock-out cost is replaced with a Type 1 service objective of 95 percent. Find the optimal values of (Q, R) in this case.


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