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Tax Preparers, Inc. works 250 days per year. The company uses adding machine tape at a rate of 8 rolls per day. Usage is believed to be normally distributed with a standard deviation of 3 rolls during lead time. The cost of ordering tape is $10 and the holding costs are $0.30 per roll per year. Lead time is 2 days.
a. Calculate the economic order quantity
b. What reorder point will provide an order cycle service level of 97%?
c. How much safety stock must the company hold to have a 97% order cycle service level?
d. What reorder point will provide an order cycle service level of 99%?
e. How much safety stock must the company hold to have a 99% order cycle service level?
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