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What is the optimal level of safety stock for Pingleni?

What is the optimal level of safety stock for Pingleni?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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8. Stock-Out Costs Each stock-out of a product sold by Pingleni Company costs P 2,000 per occurrence. The carrying cost per unit of inventory is P 5 per year and the company orders 1,500 units of product 18 times a year at a cost of P 200 per order. The probability of a stock-out at various levels of safety stock is: Units of Safety Stock Probability of a Stock-Out 0 50% 200 30% 400 600 800 What is the optimal level of safety stock for Pingleni? a. 200 units b. 400 units C. d. 14% 5% 1% 600 units 800 units
Transcribed Image Text:8. Stock-Out Costs Each stock-out of a product sold by Pingleni Company costs P 2,000 per occurrence. The carrying cost per unit of inventory is P 5 per year and the company orders 1,500 units of product 18 times a year at a cost of P 200 per order. The probability of a stock-out at various levels of safety stock is: Units of Safety Stock Probability of a Stock-Out 0 50% 200 30% 400 600 800 What is the optimal level of safety stock for Pingleni? a. 200 units b. 400 units C. d. 14% 5% 1% 600 units 800 units
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