a. P = interview review duration = 24 days = 24/30 = 0.8 Months; L = Lead time = 18days = 18/30 = 0.6 Months;

σd = 56

So, σP+L = σd * Sqrt(P+L) = 56*Sqrt(1.4) = 66.26 Units.

For 93% service level, Z = 1.476 ( As seen from the table)

Therefore, Safety stock = Z* σP+L = 1.476*66.26 = 97.79 or 98 Units

b. Average inventory on order = Average demand during the P+L interval + Safety stock = (1.4*540) + 98 = 854 Mats

c. Total cost of the safety stock = $35 * 98 = $ 3430

Therefore, Annual Holding cost of the safety stock = 20% of 3430 = $ 686

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