A company has average demand of 30 units per day.Lead time from the supplier averages 7 days.Assume that the combined standard deviation of demand during lead time has been calculated and is equal to 20 units.One unit costs $10 and the inventory carrying cost is 25 percent. Suppose management decides it wants to offer a 95 percent service level.That is, it is willing to experience a stockout probability of 5 percent during the order cycle.What is the annual cost of this safety stock policy?

Question

A company has average demand of 30 units per day.Lead time from the supplier averages 7 days.Assume that the combined standard deviation of demand during lead time has been calculated and is equal to 20 units.One unit costs $10 and the inventory carrying cost is 25 percent.  Suppose management decides it wants to offer a 95 percent service level.That is, it is willing to experience a stockout probability of 5 percent during the order cycle.What is the annual cost of this safety stock policy?

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The Answer of A company has average demand of 30 units per day.Lead time from the supplier averages 7 days.Assume that the combined standard deviation of demand during lead time has been calculated and is equal to 20 units.One unit costs $10 and the inventory carrying cost is 25 percent.  Suppose management decides it wants to offer a 95 percent service level.That is, it is willing to experience a stockout probability of 5 percent during the order cycle.What is the annual cost of this safety stock policy?

A Company Has Average Demand of 30 Units Per Day