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If a firm operates 50 weeks in a year, the demand is 50,000 per year, the ordering cost is $35 and the holding cost is $2 per unit per year. The average lead time is 3 weeks and the standard deviation of weekly demand is 125 units. Explain answers with formulas.
a. If the firm wants to provide a service level of 90 percent, what should be the safety stock?
b. What should be the reorder point?
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