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Determine the safety stock required to prevent stockouts

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Question - Clothes, Inc., has an average annual demand for red, medium polo shirts of 25,000 units. The cost of placing an order is $80 and the cost of carrying one unit in inventory for one year is $25.

Required:

a. Use the economic-order-quantity model to determine the optimal order size.

b. Determine the reorder point assuming a lead time of 10 days and a work year of 250 days.

c. Determine the safety stock required to prevent stockouts assuming the maximum lead time is 20 days and the maximum daily demand is 125 units.

Reference no: EM131778151

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