Jane distributes mugs from a supplier in Ireland. The average demand for a popular mug is 400 a day. It costs $26 to place an order each time and there is an average 12 day lead-time. The holding cost for a mug is 24% of the items cost of $18 and the company likes to maintain a 91% service level. Sigma is 540 mugs. Jane keeps her store open 210 days a year.
If Jane ordered the most economical quantity possible, what will her total annual costs be?
a) Greater than or equal to $4500 and less than or equal to $4600
b) Greater than or equal to $7400and less than or equal to $7500
c) Greater than or equal to $7600 and less than or equal to $7700
d) Greater than or equal to $4300 and less than or equal to $4400
What is Jane’s cost of safety stock if she is providing the indicated 91% service level. In other words, how much will it cost Jane a year for just the safety stock?
a) Greater than or equal to $2000 and less than or equal to $3000
b) Greater than or equal to $700 and less than or equal to $1000
c) Greater than or equal to $4200 and less than or equal to $5200
d) Greater than or equal to $3100 and less than or equal to $4100