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Annual demand for a product is 13,000 units; weekly demand is 250 units with a standard deviation of 40 units. The cost of placing an order is $100, and the time from ordering to receipt is four weeks. The annual inventory carrying cost is $0.65 per unit. To provide a 98 percent service probability, what must the reorder point be?
Suppose the production manager is told to reduce the safety stock of this item by 100 units. If this is done, what will the new service probability be?
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