Question: Petromax Enterprises uses a continuous review inventory control system for one of its SKUs. The following information is available on the item. The firm operates

Petromax Enterprises uses a continuous review inventory control system for one of its SKUs. The following information is available on the item. The firm operates 50 weeks in a year. Demand = 50,000 units/year Ordering cost = $35/order Holding cost = $2/unit/year Average lead time = 3 weeks Standard deviation of weekly demand = 125 units

If Petromax wants to provide a 90 percent cycle-service level, what should be the safety stock and the reorder point?

Equation to find the reorder point (ROP)

1pt

ROP (equation) =

Plug in all numbers into equation (above), i.e., replace all letters with numbers

2pts

Reorder point (ROP) value

1pt

ROP =

Safety Stock (SS) value

1pt

SS =

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