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Business, 25.05.2021 17:20 AalonsoCV

Pickle Pharmacy wants to determine the optimum safety stock level for drug Alpha. The annual carrying cost of Alpha is 25% of the inventory investment. The inventory investment averages $10 per unit. The stock out cost is estimated at $2 per unit. Pickle Pharmacy orders Alpha 20 times annually. Pickle Pharmacy defines the total costs of safety stock as carrying costs plus expected stock out costs. With 100 units of safety stock, there is a 15% probability of a 30-unit stock out per order cycle. What is the total annual cost of the 100 units of Alpha safety stock

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