What should their reorder level be

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Reference no: EM131437612

Monsanto is a large bio firm that sells genetically modified seed to farmers at a price of $45 per kilogram (kg). Demand for the modified seed is Normally distributed with mean 450 units a month and a standard deviation of 50 units a month. The cost to produce the seed (including the cost to purchase the raw seed from the supplier) is $8 per kg. Lead time from the supplier for raw seeds is Normally distributed with mean 2 months and a standard deviation of .33 months. They store the seed in a warehouse and while the holding cost is negligible, the seed does occupy space that could be used to store another type of seed that Monsanto knows it can sell at $4 a kg.

a) Suppose they want to maximize their profit. What should their Reorder Level be?

Reference no: EM131437612

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