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Please calculate the safety stock.

A specific product has expected demand during lead time of  100   units, with a standard deviation of  25 units. What safety stock (approximately) provides a  95%  service level?

A.41

B.55

C.133

D.140

 

Inventory Management
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Question added by Wasi Rahman Sheikh , WAREHOUSE SUPERVISOR , AL MUTLAQ FURNITURE MFG
Date Posted: 2015/03/17
Upvote (4) Views (15) Followers (8) Answers (5) Report Question
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Mir Mujtaba Ali
by Mir Mujtaba Ali , Internal Audit Manager , Confidential

A.41................................................

Muhammad Ramzan Tufail ACCA
by Muhammad Ramzan Tufail ACCA , Assistant Finance Manager , Eltizam Asset Management Group

 (A) is the Correct Ans. 

 

All the values put in the formula given by the costs analysts. 

Deleted user

EOQ = SQRT (2 × Annual Demand × Ordering Cost Per Unit / Carrying Cost Per Unit)

Hany Helmy Haleem
by Hany Helmy Haleem , Director of Warehouses , Nasco Automotive

The answer is A.41.

And the reorder point is141.

 

Best Regards

Ani Kuriakose
by Ani Kuriakose , Managing Partner – SCM , A. A. Associates

The question needs to mention the LEAD-TIME also to be answered correctly

 

SAFETY STOCK= Lead time factor * Service factor * Standard Deviation

SAFETY STOCK= Lead time factor *1.645 *25

 

**Assuming a ONE month lead-time, and as such Lead time factor =1

the safety stock of41 units should provide95% service level

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