What is the optimal order quantity and the safety stock

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The new office supply discounter, Paper Clips, Etc. (PCE), sells a certain type of ergonomically correct office chair that costs $200. The annual holding cost rate is 25% of the item cost, annual demand is 1,800 units, and the ordering cost is $50 per order. The lead time is 6 days. Because demand is variable (standard deviation of daily demand is 2.4 chairs), PCE has decided to establish a customer service level of 98% (Z=2.055). The store is open 360 days per year.

a) What is the optimal order quantity?

b) What is the safety stock?

c) What is the reorder point?

Please show how to work.

Reference no: EM131153936

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