You are asked to manage the inventory system for a particular product at a retail store. The store has collected the following information on this product: Demand = 200 units/week Standard deviation of normally distributed weekly demand = 50 units, independent over time Lead-time = 6 weeks Number of weeks per year = 52 weeks Management estimates the loss of goodwill in the event of a stockout at $50 per customer. Currently the store uses the continuous review policy for the inventory system and achieves a 95% in-stock probability. What is the annual backlogging cost in the system?

Answer rating: 100% (QA)

The annual backlogging cost in the system is by definition the amount that can be saved by implementing a different inventory management policy To cal... View the full answer