M7_IND5. Peter Sagan is in charge of maintaining hospital supplies at Champs Hospital. During the past year the mean weekly demand for a special type of tubing was 186 packages of this tubing with a standard deviation of 13 packages of tubing. The lead time for receiving this tubing from the supplier is 1.5 weeks. Peter would like to maintain a 95% service level and places an order for 750 packages every time an order is placed.

a) How much safety stock should be used for a 95% service level?

b) If the weekly demand is 186 and there is a 1.5 week lead time - what is the reorder point (95% service level)?

c) How much safety stock should be used for a 99% service level?

d) If the weekly demand is 186 and there is a 1.5 week lead time - what is the reorder point (99% service level)?

e) If the carrying cost per year is $0.50/unit/year - what is the additional cost associate with the 99% service level compared to 95% service level (i.e. cost of safety stock at 99% level - cost of safety stock at 95% service level)?