Determine the amount of safety stock that would be needed

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Reference no: EM13922310

Weekly demand for diesel fuel at a department of parks depot is 250 gallons. The depot operates 52 weeks a year. Weekly usage is normal and has a standard deviation of 14 gallons. Holding cost for the fuel is $1 a month, and it costs $20 in administrative time to submit an order for more fuel. It takes one-half week to receive a delivery of diesel fuel. Determine the amount of safety stock that would be needed if the manager wants

a. An annual service level of 98 percent. What is the implication of negative safety stock?

b. The expected number of units short per order cycle to be no more than five gallons.

Reference no: EM13922310

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