The probability distribution of demand during lead time of a certain product is given below.
Demand During Lead Time Probability
240 0.05
260 0.10
280 0.20
300 0.30
320 0.20
340 0.10
360 0.05
The following additional data is available:
Cost per unit = $10
Delivery Charges per unit = $1.50
Selling price per unit = $19
Salvage value = $7 per unit
Q1. Determine the optimal reorder level.
Q2. Determine the expected safety stock.
Q3. What salvage value will increase the reorder level to 340 units?