Question

Using the data in Exhibit 3, what is the optimal inventory level for Griffin 500 ml Beaker given the cost of underage is 48 cents, cost of overage is 2 cents and average bi-weekly demand (1 warehouse) is 433.4 units and standard deviation of bi-weekly demand is 51 units?

Trying to double-check my solution, thank you.

Exhibit 3: Information on Representative Products
	Griffin 500ml Beaker	Erlenmeyer 500ml Flask
2009 units sold	11,268	3,389
Percent of all units sold	0.1%	0.03%
Annual carrying cost (%)	14%	14%
Unit price	$         8.80	$        9.50
Unit cost	$         3.96	$        4.56
Cost of underage	$         0.48	$        0.49
Cost of overage	$        0.021	$      0.025
Optimal service level	95.8%	95.3%
Average bi-weekly demand (8 warehouses)	54.2	16.3
Standard deviation of bi-weekly demand (8 warehouses)	21.4	10.9
Average bi-weekly demand (2 warehouses)	216.7	65.2
Standard deviation of bi-weekly demand (2 warehouses)	38.3	19.5
Average bi-weekly demand (1 warehouse)	433.4	130.3
Standard deviation of bi-weekly demand (1 warehouse)	51.0	26.0

Answer 1

Explanation:-

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