How often will stock out occur during re-order cycle

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Reference no: EM131764844

The purchasing manager for Alpa Enterprises requested the following data from the accounting department:

- Annual demand = 15,500;

-Cost of placing an order = $180;

Annual inventory holding costs = $26,4;

Unit cost = $132

Assume Alpha’s demand for an item during the lead time is normally distributed with a mean of 5,000 and a standard deviation of 50.

What reorder point should be used in order to average no more than one stock out every 20 re-order cycles?

If safety stock is 70, how often will a stock out occur during a re-order cycle?

Reference no: EM131764844

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