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ABC Ltd has determined that its reorder point is 50 units when there are no safety stocks. Its carrying cost per unit per year is $ 5 and stock out cost is $ 40 per unit a customer misses.
ABC Ltd has experienced probability distribution for inventory demand during lead-time is shown below;
No. of units Probability
30 0.2040 0.2050 0.3060 0.2570 0.05 1.00
Required
The optimal No. of orders is 6. What is the optimal level of safety stock and the associated re-order point?
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