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