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Inventory Control - Calculate Safety Stock

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I need to verify the solution of the following problem.

Mr Beautiful, an organization that sells weight training sets, has an ordering cost of $45 for the BB-1 set (BB-1 stands for Body Beautiful Number 1).
The carrying cost for BB-1 is $6 per set per year. To meet demand, Mr. Beautiful orders large quantities of BB-1 7 times a year.
The stockout cost for BB-1 is estimated to be $40 per set.
Over the past several years, Mr. Beautiful has observed the following demand during the lead time for BB-1:

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 BB-1 is 60 sets. What level of safety stock should be maintained for BB-1?
The optimal quantity of safety stock which minimizes expected total cost is _____ sets (enter response as a whole number)

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Solution Summary

The expert examines inventory controls to calculate the safety stocks.

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The optimal level of safety stock is the point where probability of demand being greater ...

Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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