Assignment:
Arms of Steel is an organization that sells weight training sets. The carrying cost for the AS1 model is $5 per set per year. To meet demand, Arms of Steel orders large quantities of AS1 seven times a year. The stockout cost for AS1 is estimated to be $50 per set. Over the past several years, Arms of Steel has observed the following demand during the lead time for AS1:
|
Demand During Lead Time
|
Probability
|
|
40
|
0.1
|
|
50
|
0.2
|
|
60
|
0.2
|
|
70
|
0.2
|
|
80
|
0.2
|
|
90
|
0.1
|
The reorder point for AS1 is 60 units. What level of safety stock should be maintained for the AS1 model?