Find the level of the safety stock if the cycle service level is to stay at 98%.

The Economic Order Quantity is 250 units.

The average inventory is 125 units.

The Inventory Holding Cost is $187.50.

10 orders would be made each year, at an annual order cost of $187.50.

The Total Annual Cost of managing the inventory is $375.00 per year.

The time between orders is 25 days.

The average WEEKLY demand is 50 units with a standard deviation of 12 units.

QUESTIONS:

1) Henry’s proposal and a periodic review system where orders are placed regularly every four weeks.

1. Find the level of the safety stock if the cycle service level is to stay at 98%.
2. Find the number of orders per year and the annual ordering cost.
3. Find the average order size and the annual cost of holding the cycle inventory (excluding the safety stock).
4. Find the total annual inventory cost of this system, including the cost of the merchandise and the holding cost of the safety stock.
5. You are currently at a reorder point and find that there are exactly 130 units left in stock. How many units should you order?
6. Determine the probability that you experience a stockout situation before the current order is delivered.