Joanne's Garden Products always seems to be out of 20-20-20 fertilizer. This results in angry customers and
Question:
Joanne's Garden Products always seems to be out of 20-20-20 fertilizer. This results in angry customers and unhealthy herbage. Joanne knows that the economic order quantity for this fertilizer is 100 units, that the carrying cost is $4.25 per package, and that the stockout cost is $2.00 per package. Total annual demand for the product is 2,500 packages. Joanne has hired a marketing firm to evaluate the probabilities relating to demand for the fertilizer. They produced the following table relating to the stockout problem:
Number of packages needed to meet Probability
demand during the reorder period
0 .83
20 .15
30 .02
REQUIRED:
Calculate the number of units of safety stock Joanne should keep on hand to meet excess demand for the fertilizer during the reorder period.
Cost Accounting A Managerial Emphasis
ISBN: 978-0136126638
13th Edition
Authors: Charles T. Horngren, Srikant M.Dater, George Foster, Madhav