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 TIME
|
PROBABILITY
|
|
600
|
0.30
|
|
650
|
0.20
|
|
700
|
0.10
|
|
750
|
0.10
|
|
800
|
0.05
|
|
850
|
0.05
|
|
900
|
0.05
|
|
950
|
0.05
|
|
1000
|
0.05
|
|
1050
|
0.03
|
|
1100
|
0.02
|
|
Total:
|
1.00
|
The lead time is 12 working days. How much safety stock should Home Supplies, Inc., maintain?