Practice Problem #5:

Delta-Gen, Inc., purchases specialized construction cement from an overseas supplier under a continuous review system. The average demand is 620 units/day with a standard deviation of 50 units/day. It costs $50 to process each order and the unit holding cost is $3.25 per year. The lead time is 7 days per year and the company policy is to maintain a 84% service level. Assume the number of working days to be 250.

1.) Safety stock to satisfy 84% cycle service level is (rounded to whole number)

2.) The reorder point to satusfy 84% cycle seevice level is (whole number)

3.) The annual cost of holding the safey stock to maintain the annual cost of holding is:

4.) If lead time increases drom 7 days to 9 days, the new reorder point needed to maintain an 84% service level is: