Safty Circuits Inc. stocks and sells small electronics products using an (R, S) type of control system. A manager reviews the stock monthly. The supplier delivers at their location following a lead time of 10 days. Inventory carrying charge is 0.12 $/$/year. The manager has observed that demand for the XRL line is as follows:

Item (i)	Demand (Di) (Packs/year)	σi,1 (Packs)
XLR-1	1200	35
XLR-2	350	50
XLR-3	700	40

where σi,1 is the standard deviation of yearly demand for item i. Suppose that a TSS of $1,200 is to be allocated among the three items. Consider the following service measures:

1. Same k for the 3 items

2. Same P₁ for the 3 items

3. Same TBS for the 3 items

4. Same B₁ for the 3 items

5. Same B₂ for the 3 items

For each, determine:

a. How the $1,200 is allocated among the three items?

b. ETSOPY (expected total  #stock-outs per year)

c. ETVSPY (expected total value short per year)

Answer rating: 100% (QA)

a 1 The same k for the 3 items 1200 is allocated equally among the three ... View the full answer