E15.25 Lead time and safety stock Monitor Ltd uses 780 tonnes of a chemical each year in its manufacturing processes. Monthly demand for the chemical fluctuates between 65 and 80 tonnes. The lead time for each order is one month and the economic order quantity is 130 tonnes. Required: 1. Determine the safety stock required for the chemical; and 2. Calculate the reorder point in tonnes for the chemical.

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A: Following formula can be used to calculate the re-order point:

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