Evaluate Safety-Stock Policy: Forest Products Corporation manufactures Maquis as one of its agriculture items. The manufacturing process requires several inputs including a nitrogen fixer, NFX. The company uses 39,000 units of NFX per year and makes 15 orders per year in economic lot sizes of 2,600 units. The cost to carry a unit of NFX is $24.40. If there is a stockout, a carload of NFX must be purchased at retail from a local supplier. The retail price is $1,650 per order greater than the price from the regular supplier. Looking at the past order records, it appears that certain safety-stock levels would result in stockouts according to the following schedule:

Required: What level of safety stock would result in the least cost to the company?

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Safety-Stock Quantity 0 Probability of Stockout .60 150 .20 175 .06 250 .02