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A company operating under a continuous review system has an average demand of 50 units per week for the item it produces. The standard deviation in weekly demand is 20 units. The lead-time for the item is six weeks, and it costs the company $30 to process each order. The holding cost for each unit is $10 per year. The company operates 52 weeks per year. Use the Z-table (normal distribution table) that I posted in the inventory folder. Q2) What is the desired safety stock level if the company has a policy of maintaining a 95% cycle-service level?

  • A. Approximately 60 units
  • B. Approximately 80 units
  • C. Approximately 50 units
  • D. Approximately 90 units
  • E. Approximately 100 units
  • F. Approximately 70 units
 
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