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For SKU A 3510 at the Hardware Warehouse, the order quantity has been set at 150 units each time an order is placed. The daily demand is normally distributed, with a mean of 12 units and a standard deviation of 4. It always takes exactly 5 days for an order of this item to arrive. Holding cost has been determined to be $10 per unit per year. Due to the large volume of item sold, management wants to maintain a 99% service level.

A) What is the standard deviation of demand during the lead-time?

B) How much safety stock should be carried, and what should be the reorder point?

C) What is the total annual holding cost?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M91640799

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