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Scenario: Carrier sells air conditioning units to…
Scenario: Carrier sells air conditioning units to distributors. Ahead of the upcoming summer, demand probability is 40,000 units (25%), 55,000 units (35%), 70,000 units (25%), and 80,000 units (15%).
· Fixed cost of production = $500,000
· Variable cost of production per unit = $1,200
· Per unit selling price= $1500
· Salvage value for unsold products = $900
With an expected demand of 55,000 units for the summer (May-July), a maximum demand of 80,000 units for the summer, and a 2-week lead time, calculate the amount of safety stock needed to cover demand.
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