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Bunak Company would like to assess its safety stock level if it will cost them high or low. Recently, the management sets that the total safety stock carrying and stockout costs for the year should not exceed $110.
Their current information about the current level of safety stock and other information follows:
Safety stock level 30 units
Probability of stockout per order 15%
Carrying cost per unit $1.50
Stockout cost $15
Annual demand 1,000
Economic order quantity 250
Required:
Problem 1: Based on the information, decide whether the current safety stock level meets the management's requirements.
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