Dyson specializes in repairing vacuum cleaners. Dyson receives weekly deliveries from its vacuum cleaner belt supplier, who replenishes belts up to a level that Dyson appliance is free to specify. Dyson buys a very popular belt at a unit price of $17.50. The annual inventory carrying charge is 20%. Weekly demand for belts is normally distributed with mean 86 and standard deviation 24. Dyson management wants to limit the probability of a stock-out on any given week not to exceed 1%.
(a) What replenishment level would you recommend?
(b) What is Dyson' average level of safety stock?
(c) What is Dyson annual cost of holding cycle stock?