Mr. Beautiful, an organization that sells weight training sets, has an ordering cost of $40 for the BB-1 set. (BB-1 stands for Body Beautiful Number 1.) The carrying cost for BB-1 is $5 per set per year. To meet demand, Mr. Beautiful orders large quantities of BB-1 seven times a year. The stock out cost for BB-1 is estimated to be $50 per set. Over the past several years, Mr. Beautiful has observed the following demand during the lead time for BB-1:
|
Demand During Lead Time
|
Probability
|
|
40
|
.1
|
|
50
|
.2
|
|
60
|
.2
|
|
70
|
.2
|
|
80
|
.2
|
|
90
|
.1
|
|
|
1.0
|
The reorder point for BB-1 is 60 sets. What level of safety stock should be maintained for BB-1?