 # Question & Answer: The annual demand for SCM301, Inc., is 1,000 units, standard deviation of demand during lead time is…

The annual demand for SCM301, Inc., is 1,000 units, standard deviation of demand during lead time is 25 units, and lead time is constant at 15 days. Assume 250 workday years and that daily demand is normally distributed. A 95 % service level will require safety stock of approximately 37 units 101 units 41 units 60 units

159 units ( it does not match with any alternatives)

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Working note:

Daily demand (D) = yearly demand / no. of working days in a year = 1000/250 = 4 units

Lead time (L) = 15 days

Standard deviation (SD) = 25 units

Value of Z at 95% level = 1.645

Now,

Safety stock = Z*SD*(L)^.5 = 1.645*25*(15)^.5

Safety stock = 159.27 units or 159 units