the purchasing agent responsible for ordering cotton underwear for ace retail stores 337009

The purchasing agent responsible for ordering cotton underwear for Ace Retail Stores has come up with the following information:

Sol:

1. Compute the safety stock.

2. Calculate the reorder point.

2. Reorder point = Average usage during lead time + Safety stock

= 80 packages X 9 days + 180 packages = 720 + 180 = 900 packages

Harrington &Sons, Inc., would like to determine the safety stock to maintain for a product so

that the lowest combination of stockout cost and carrying cost will result. Each stockout will

cost $75; the carrying cost for each safety stock unit will be $1;the product will be ordered five

times a year. The following probabilities of running out of stock during an order period are

associated with various safety stock levels:

Using the expected value approach, determine the safety stock level.