Question: 1. A product is ordered eight times a year . The following table shows the historical distribution of demand values observed during the reorder period.

1. A product is ordered eight times a year. The following table shows the historical distribution of demand values observed during the reorder period.

Demand

Probability

250

.2

260

.3

270

.2

280

.1

290

.2

Currently, stockouts are valued at $4 per unit per occurrence, while inventory carrying costs are $2 per unit per year. Should the firm add safety stock? If so, how much safety stock should be added?

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