Determine optimal reorder point and the safety stock level

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Reference no: EM131471288

JJ Company sells chalks. Its annual demand is normally distributed with mean of 1, 200 units and standard deviation of 40 units. The company orders its products from its flagship store. It costs $200 to place an order as set up cost, and the delivery lead time is two weeks. JJ Company estimates that each stock out causes a loss of $30 in future goodwill. It pays $50 for each unit of chalk and sells it for $150. The annual cost of holding a unit quantity in inventory is 20% of its purchase cost. Assuming that all stockouts result in lost sales, determine optimal reorder point and the safety stock level.

Reference no: EM131471288

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