Answer:
The optimal quantity of safety stock which minimizes expected total cost is _ units is 100 units.
Explanation:
Incremental Costs would be considered here to evaluate which safety stock level is the best for the company.
The working is as under:
Safety Stock Carrying Cost Stock-out Cost Total Cost
0 0 (100*0.2 + 200*0.2) * 80 4,800
100 100*30 = $3000 (100 * 0.2) * 80 1,600
200 200*30 = $6000 (200 * 0.2) * 80 3,200
The total cost has started growing as the safety starts growing above the 100 units level. This means that the safety stock must be 100 units as the cost at this level is the lowest to the company.
Inventory is termed as the accounting name of the stock of the goods and services in the economy. This is the produced level of the final goods of the firm.
100 units are the optimal quantity of safety stock for reducing the anticipated total cost.
Here, incremental costs would be considered to determine whether the level of inventory level is optimum for the firm.
The calculation is as shown below:
Safety Stock Carrying Cost Stock-out Cost Total Cost
0 0 [tex](100\times0.2 + 200\times0.2) \times 80[/tex] 4,800
100 [tex]100\times30 = \$3000[/tex] [tex](100 \times 0.2) \times80[/tex] 1,600
200 [tex]200\times30 = \$6000[/tex] [tex](200 \times 0.2) \times 80[/tex] 3,200
The overall cost has risen up when the degree of safety rises above 100 units. This indicates that the safety stock must be 100 units because the company's cost becomes the least at this point.
To know more about the inventory and its calculation, refer to the link below:
https://brainly.com/question/15838495
