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What is the number of units of safety stock

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Reference no: EM132557508

Question - A Company wishes to determine the amount of safety stock that it should maintain for product Z to result in the lowest cost. The following information is available:

Stock out cost $80 per occurrence

Carrying cost of safety stock $2 per unit

Number of purchase orders 5 per year

The options available for A Company are as follows:

Units of safety stock

Probability of running out of safety stock

10

50%

30

30%

50

10%

55

5%

Required - What is the number of units of safety stock that will result in the lowest cost?

Reference no: EM132557508

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