What is the added cost due to the uncertainty of demand ie


An item has a demand which averages 200 units monthly. The lead time demand is normally distributed with a mean of 100 units and a standard deviation of 50. Order cost are $45 and holding costs are 20% of average inventory value. If each item cost the company $12 and management desires to stockout only once during the year, formulate an inventory policy for this item. What is the added cost due to the uncertainty of demand (i.e. this is the cost of holding the safety stock)?

Request for Solution File

Ask an Expert for Answer!!
Operation Management: What is the added cost due to the uncertainty of demand ie
Reference No:- TGS02441708

Expected delivery within 24 Hours