A service station uses 1,200 cases of oil a year. Ordering cost is $40, and annual carrying cost is $3 per case. The station owner has specified an annual service level of 99%. ROP = 77 cases
a. What level of safety stock is appropriate if lead time demand is normally distributed with a mean of 80 cases and a standard deviation of 5 cases?
b. What is the risk of a stockout during lead time?