The annual demand for a product has been projected at 2,000 units. This demand is...
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Accounting
The annual demand for a product has been projected at 2,000 units. This demand is assumed to be normally distributed with a standard deviation of 2 units. The ordering cost is $20 per order, and the holding cost is 20 percent of the purchase cost. The purchase cost is $40 per unit. There are 250 working days per year. Whenever an order is placed, it is known that the entire order will arrive on a truck in 6 days (i.e., a constant lead-time). Currently, the company is ordering 500 units each time an order is placed. What level of service would require a reorder point of 60 units?
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