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Weekly demand for area rugs at a Pottery Barn distribution center (DC) is normally distributed with a mean of 79 units/day and standard deviation
Weekly demand for area rugs at a Pottery Barn distribution center (DC) is normally distributed with a mean of 79 units/day and standard deviation of 26 units/day. Pottery Barn orders rugs at a unit cost of $253. The annual cost of carrying inventory at the store is 44% of the purchase cost per unit per year. It takes 27 days to receive a delivery. The store reviews its inventory continuously. Assume 52 weeks/year, 7 days/week and 364 days/year. Compute the annual holding cost of the safety stock (in $) needed to maintain a cycle service level of 98%. Carry your calculations to at least 3 decimal places. Round your answer to the nearest tenth of a dollar (one decimal place). A table of z-values is provided for your reference. Service Level z value 0.9 1.282 0.91 1.341 0.92 1.405 0.93 1.476 0.94 1.555 0.95 1.645 0.96 1.751 0.97 1.881 0.98 2.054 0.99 2.326
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