A company has an annual demand of 1000 units, ordering cost

A company has an annual demand of 1000 units, ordering cost of Rs. 100/ order and carrying cost of Rs. 100/unit-year. If the stockout costs are estimated to be nearly Rs. 400 each time the company runs out-of-stock, the safety stock justified by the carrying cost will be

D = 1000 Units
C_O = 100 Rs/order
C_h = 100/ unit/order
C_s = 400 each time

⇒ 50

S* = Q *		C_h		= 50		100
		C_S + C_h				500

S* ⇒ 10
Softly Stock Justified by the carrying cost = Maximum Inventory level M = Q* – S* = 40