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A Company wishes to determine the amount of safety stock that it should maintain for product Z to result in the lowest cost. The following
A Company wishes to determine the amount of safety stock that it should maintain for product Z to result in the lowest cost. The following information is available:
Stock out cost $80 per occurence Carrying cost of safety stock $2 per unit Number of purchase orders 5 per year The options available for A Company are as follows: Units of safety stock Probability of running out of safety stock 10 50% 30 30% 50 10% 55 5% What is the number of units of safety stock that will result in the lowest cost?
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