### How much safety stock should be carried

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Authentic Thai rattan chairs (shown in the photo) are delivered to Gary Schwartz's chain of retail stores, called The Kathmandu Shop, once a year. The reorder point, without safety stock, is 200 chairs. Carrying cost is \$30 per unit per year, and the cost of a stock out is \$70 per chair per year. Given the following demand probabilities during the lead time, how much safety stock should be carried?

 Demand During Lead Time Probability 0 0.2 100 0.2 200 0.2 300 0.2 400 0.2

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