I. INSTRUCTIONS: Solve the following problems: 1. The daily demand of a product can be specified by a normal distribution. Its average daily demand is 500 units with a standard deviation of 25 units. The delivery lead time of this product is also normally distributed with an average of 10 days and a standard deviation of 3 days. a) What will be the safety stock and reorder point for a 95 percent service level? b) What will be the safety stock and reorder point should the company decides to increase the service level to 99%? 2. Lindner Congress Bookstore sells books to college students. The demand a specific book has a normal distribution with an average daily demand of 25 units and a standard deviation of 5 units per day. The lead time for this calculator is very stable at 7 days. Compute for: a) the standard deviation of demand during lead time b) the safety stock and statistical reorder point that result in 2.5% stockouts. 3. The figures below show the demand for a product for the past three (3) months. January = 550 units February = 350 units March = 450 units The average leadtime is 9 days with a standard deviation of 2 days. a) the safety stock and ROP at a service level 95% b) the additional safety stock/ROP when the service level is raise to 97.5% 4. Paris Store stocks a part that has a normal distribution demand pattern during the reorder point. The average demand during leadtime is 1,500 units and a standard deviation during leadtime of 100 units. a) What will be the safety stock and reorder point that will result to a 5% stockouts? b) What will be the safety stock and reorder point that will result to a 10% stockouts?

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