How much safety stock should be carried

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Reference no: EM131356372

Tobacco is shipped from North Carolina to a cigarette manufacturer in Cambodia once a year. The reorder point, without safety stock, is 200 kilos. The carrying cost is $15 per kilo per year, and the cost of a stock out is $70 per kilo per year. Given the following demand probabilities during the lead time, how much safety stock should be carried?

Demand During Lead Time (Kilos)	Probability
0	0.1
100	0.1
200	0.2
300	0.4
400	0.2

Reference no: EM131356372

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