Calculate the annual carrying cost of the safety stock

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Demand for breakfast cereals at Crunchy SuperStore is 20,000 boxes per month. The holding cost is 60 cents per box per year. For each order placed, the retailer incurs an ordering cost of $40. The cost of each box of cereal is $3 and sold to consumers at a retail price of $5. If Crunchy orders in quantities of 30,000 boxes or more, the retailer can get a 1% discount on the cost of the breakfast cereals. How many boxes of cereals should Crunchy order per replenishment? Why? Show your work and explain it.

part B) Also, suppose that the daily demand for cereals is normally distributed with an average daily demand of 100 boxes and a standard deviation of 5 boxes of cereals per day. The lead time for receiving a new order of cereals is 9 days. The holding cost is 60 cents per box per year. Calculate demand during lead time, the standard deviation of demand during lead time, the risk of stockout, safety stock, and reorder point if the store wants a service level of 95%. Calculate the annual carrying cost of the safety stock.

Reference no: EM132701658

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