Reference no: EM132628896

Bunak Company would like to assess its safety stock level if it will cost them high or low. Recently, the management sets that the total safety stock carrying and stockout costs for the year should not exceed $110.

Their current information about the current level of safety stock and other information follows:

Safety stock level                      30 units

Probability of stockout per order    15%

Carrying cost per unit                  $1.50

Stockout cost                            $15

Annual demand                             1,000

Economic order quantity                    250

Required:

Problem 1: Based on the information, decide whether the current safety stock level meets the management's requirements.