HOMEWORK EXERCISE (4122) You are a distributor of steel cables that are used in many different kinds of construction applications. For a particular type of cable, you stock this product in reels of either 2,000 feet or 5,000 feet. (NOTE: for this exercise assume that 1 month =4 weeks.) 1. Your demand for the 5,000-foot reels is 1,500 reels per month. The standard deviation of demand is 300 reels per month. Reorder lead-time is 8 weeks. How much safety stock do you need to achieve a service level of 90s ? 2. What is the reorder point for this level of service? 3. You are able to locate a new supplier who can deliver in 3 weeks. What would your reordey point be wich a 3-week ledi-time for a 901 service level? 4. Assume that your lead-time continues at 8 wetks as in "2" and "2" above. You wish to ralse your servica level to 958. How much additional safety stock wifl you peed to carzy? 5. If the cost of each reel is $300, how much addicional cash will be pled up in safety stock to make this changa? 5. If the cost of each reel is $300, how much addiional cash will be tied up in safety stock to make this change? 6. Assume that you pay for this additional inventory by drawing on a 1 ine of credit. If the interest rate on this credit ilne is 6.5% per annum, and you carry thiy balance for ono yoar, how "much additional interest expense will you have incurzed due to this increase in safety stock? 7. What other concerns/1asues do you aeed to take into conaideration in order to decfde whether of not to makn this investment