What is the safety stock and what is the reorder point

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Reference no: EM132196243

The new office supply discounter, Paper Clips, Etc. (PCE), sells a certain type of ergonomically correct office chair that costs $400. The annual holding cost rate is 25% of the item cost, annual demand is 5000 units, and the ordering cost is $25 per order. The lead time is normally distributed and on average takes 10 days with a standard deviation of 1 day. Because demand is variable (standard deviation of daily demand is 4 chairs), PCE has decided to establish a customer service level of 90% (Z=1.28). The store is open 300 days per year. (10 points)

a) What is the optimal order quantity?

b) What is the safety stock?

c) What is the reorder point?

Reference no: EM132196243

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