Should be the safety stock and reorder point to avoid stock

Reference no: EM133233034

Assignment:

An item needed for every day production is purchased for Rs. 2000 and need a storage cost of Rs. 50 per year. A purchase order is made at an expense of Rs. 560 every time. The annual demand of this item is 1000 units.

a. What should be the order quantity?

b. What would be the total cost? c. Daily demand of the item is normally distributed and varies with a SD of 4. If the production happens 250 days in a year and the supplier takes a lead time of 5 days, what is should be the safety stock and reorder point to avoid stockout by 95%.

Reference no: EM133233034

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