Problem 7-25 You manage inventory for your company and use a continuous review inventory system to control reordering items for stock. Your company is open for business 300 days per year. One of your most important items experiences demand of 20 units per day, normally distributed with a standard deviation of 3 units per day. You experience a lead time on orders from your supplier of six days with a standard deviation of two days. The unit price, regardless of order size, is $4.75. Your ordering cost is $10. Your inventory carrying cost is 20 percent. You have established a service level policy of 97.5 percent on this item. Use Table 7-2. a. What is your optimal order quantity? (Round up your answer to the next whole number.) Optimal order quantity 356 units b. What is your reorder point? (Round your answer to the nearest whole number.) Reorder point 199 units c. How much safety stock do you carry? (Do not round intermediate calculations. Round up your answer to the next whole number.) Safety stock 79 units d. What is your average inventory? (Round your answer to the nearest whole number.) Average inventory 218 units TABLE 7-2 Standard Deviations and Probabilities Z = Number of Deviations Required Probability of Being In Stock Probability of Stockout 1 84.13% 15.77% 1.04 85 15 1.28 90 10 1.65 95 5 1.96 97.5 2.5 2.0 97.72 2.28 2.33 99 1 3.0 99.86 0.14