The demand for barbecue grills has been fairly

| August 30, 2017

Question
The demand for barbecue grills has been fairly large in the past several years, and Home Supplies, Inc., usually orders new barbeque grills five times a year. It is estimated that the ordering cost is $60 per order. The carrying cost is $10 per grill per year. Furthermore, Home Supplies, Inc., has estimated that the stockout cost is $50 per unit. The ROP is 650 units. Although the demand each year is high, it varies considerably. The demand during the lead time is shown in the following table:

DEMAND DURING LEAD TIMEPROBABILITY
6000.3
6500.2
7000.1
7500.1
8000.05
8500.05
9000.05
9500.05
1,0000.05
1,0500.03
1,1000.02
Total: 1.00

The lead time is 12 working days. How much safety stock should Home Supplies, Inc., maintain?

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