The demand for barbecue grills has been fairly large in the past
The demand for barbecue grills has been fairly large in the past several years, and Home Supplies, Inc., usually orders new barbeque grills five times a year. It is estimated that the ordering cost is $60 per order. The carrying cost is $10 per grill per year. Furthermore, Home Supplies, Inc., has estimated that the stockout cost is $50 per unit. The ROP is 650 units. Although the demand each year is high, it varies considerably. The demand during the lead time is shown in the following table:
|
PROBABILITY |
|
|
600 |
0.30 |
|
650 |
0.20 |
|
700 |
0.10 |
|
750 |
0.10 |
|
800 |
0.05 |
|
850 |
0.05 |
|
900 |
0.05 |
|
950 |
0.05 |
|
1000 |
0.05 |
|
1050 |
0.03 |
|
1100 |
0.02 |
|
Total: |
1.00 |
The lead time is 12 working days. How much safety stock should Home Supplies, Inc., maintain?