A building materials supplier obtains its bagged cement from a single supplier. The annual demand is normally distributed with average of 2,500 tonnes and standard dev. 250. The lead-time for a supply is 10 days. Estimate of the costs of placing an order is at around $25 each time an order is placed, and the annual cost of holding inventory is considered to be 20% of the purchase cost. The company purchases cement at $60 per tonne. How much should a company order at a time? What will be the Reorder Point if the desired service level during the lead time is 98%?

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Annual demand D 2500 tonnes Standard deviation of annual demand s 250 tonnes L... View the full answer