How much safety inventory does goodstone currently carry

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Reference no: EM133987055

Assignment:

The manager at Goodstone Tires, a distributor of tires in Illinois, uses a continuous review policy to
manage their inventory. The manager currently orders 10,000 tires when the inventory of tires drops to 6,000. Weekly demand for tires is normally distributed with a mean of 2,000 and a standard deviation of 500. The replenishment lead for tires is two weeks. Each tire costs Goodstone $40 and the company sells each tire for $80. Goodstone incurs a holding cost of 25 percent.

How much safety inventory does Goodstone currently carry? How much safety inventory should Goodstone carry if the cost of understocking is $80 per tire in lost current and future margin?

Reference no: EM133987055

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