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Given this information:
Lead-time demand = 600 pounds
Standard deviation of lead-time demand = 52 pounds (Assume normality.)
Acceptable stockout risk during lead time = 4 percent
a. What amount of safety stock is appropriate? b. When should this item be reordered?
Annual interest of 5% paid if balance exceeds 800, $7 monthly fee if account falls below minimum balance, average monthly balance $1,160, account falls below $800 during 5 months
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