cost is P400 per sack per year, and stock out cost is P250 per sack. Calculate the optimal reorder point and the safety stock they need to keep.

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A rice mill currently has a reorder point of 200 sacks of grains. The probability that demand
will change over the month is given in the table below. The rice mill projects ten orders per year, holding
cost is P400 per sack per year, and stock out cost is P250 per sack. Calculate the optimal reorder point
and the safety stock they need to keep.
Demand
150
180
200
250
270
300
Probability
0.12
0.05
0.15
0.23
0.20
0.25
Transcribed Image Text:A rice mill currently has a reorder point of 200 sacks of grains. The probability that demand will change over the month is given in the table below. The rice mill projects ten orders per year, holding cost is P400 per sack per year, and stock out cost is P250 per sack. Calculate the optimal reorder point and the safety stock they need to keep. Demand 150 180 200 250 270 300 Probability 0.12 0.05 0.15 0.23 0.20 0.25
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