Question

Tobacco is shipped from North Carolina to a cigarette manufacturer in Cambodia once a year. The reorder point, without safety stock, is 200 kilos. The carrying cost is $15 per kilo per year, and the cost of a stockout is $70 per kilo per year. Given the following demand probabilities during the lead time, how much safety stock should be carried?
Demand During Lead Time
Kilos Probability
0 ................... 0.1
100 ................... 0.1
200 ................... 0.2
140 ................... 0.4
100 ................... 0.2



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  • CreatedJuly 23, 2013
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