After analyzing the costs of various options for obtaining brackets, Ross White (see Problems 6-25, 6-26, and 6-27) recognizes that although he knows that lead time is 2 days and demand per day averages 10 units, the demand during the lead time often varies. Ross has kept very careful records and has determined lead time demand is normally distributed with a standard deviation of 1.5 units.
(a) What Z value would be appropriate for a 98% service level?
(b) What safety stock should Ross maintain if he wants a 98% service level?
(c) What is the adjusted ROP for the brackets?
(d) What is the annual holding cost for the safety stock if the annual holding cost per unit is $1.50?