Find extra cost due to the uncertainty of demand

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Suppose that an analysis of Floyd's muffler demand shows that the lead-time demand follows a normal probability distribution with µ = 12 and σ = 2.5. If Floyd's management can tolerate one stock out per year, what is the revised reorder point?

What is the safety stock for part (b)? If holding cost= $5/unit/year, what is the extra cost due to the uncertainty of demand?

Reference no: EM132728625

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