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Stephen owns an importing wholesaler selling tilapia fish fillets that are imported from Uganda to South Africa. Recently Stephen has seen demand for the imported fillets soar as the local market demand for the fish has grown considerably. He has, however, been experiencing what he feels are frequent stock-outs and is considering keeping safety stock to avoid this in future. So far Stephen has used his experiences to create a probability distribution of demand in an average lead time: Demand in lead time Probability 500 0,10 1000 0,40 1100 0,30 1200 0,20 Sum 1,00 One fillet (one unit) sells for R20, while it costs R10. Stephen has estimated his carrying cost per unit at R2, while his order costs per order is R1000. His business usually sells 25 000 fillets per year.
Question 1: determine the EOQ for Stephens's business.
A. 1000 units
B. 5000 units
C. 20 000 units
D. 25 000 units
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