Question
A part is demanded at the rate of 470 per week. The part is purchased from a supplier in Asia, and the lead time is
A part is demanded at the rate of 470 per week. The part is purchased from a supplier in Asia, and the lead time is 8 weeks. The standard deviation of demand during the lead time is 26 units. If the company wants to have a service level of 95%, how much safety stock should the company hold for this part? If the opportunity cost of capital for the company is estimated to be 25% and the part cost $100, what is the annualized cost of the safety stock required to achieve the desired service level?
Standard Normal Table | |
Service level | z value |
0.90 | 1.28 |
0.95 | 1.65 |
0.975 | 1.96 |
0.98 | 2.05 |
0.99 | 2.33 |
The safety stock is _____enter your response here
units. (Enter your response rounded up to the next whole number.)
The annualized cost of safety stock is______enter your response here.
(Enter your response rounded to the nearest dollar.)
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