Scenario 9.7 You Are the Operations Manager of a Firm That Uses

Multiple Choice

Scenario 9.7
You are the operations manager of a firm that uses the continuous-review inventory control system.Suppose the firm operates 52 weeks a year,365 days,and has the following characteristics for its primary item:
Demand = 25,000 units/year
Ordering cost = $30/order
Holding cost = $8/unit/year
Lead time = 2 weeks
Standard deviation in weekly demand = 100 units
A normal distribution table is appended to this exam.
-Use the information in Scenario 9.7.What is the annual cost of holding safety stock for this item if they use a 90% service level?

A) less than or equal to $1,500
B) greater than $1,500 but less than or equal to $1,550
C) greater than $1,550 but less than or equal to $1,600
D) greater than $1,600