1. The manager at Monson Kitchens, a distributor of kitchen cabinet doors in Dublin, uses a continuous review policy to manage inventory. The manager currently orders 11,000 doors when the inventory of doors drops to 7,500. Weekly demand for tires is normally distributed, with a mean of 3,000 and a standard deviation of 550. The replenishment lead time for tires is two weeks. Each door costs Monson’s Kitchens €14, and the company sells each door for €32. Monson Kitchens incurs an annual holding cost of 22 percent. 
2. 
   
3. How much safety inventory does Monson Kitchen currently carry? 
4. At what cost of understocking is the manager’s current inventory policy justified?

Answer rating: 100% (QA)

To calculate the safety inventory and the cost of understocking in this scenario well need to use the formula for safety stock and the cost of underst... View the full answer