Possibility of stock outs

I am studying F9 from BPP and I came across this for the “Maximum and buffer safety inventory”.

“If, however, you are given a question where the risk of stock-outs is assumed to be worth taking, and the costs of stock-outs are quantified, the re-order level may not be calculated in the way described above. For each possible re-order level, and therefore each possible level of buffer inventory, calculate:
– The costs of holding buffer inventory per annum
– The costs of stock-outs (Cost of one stock-out * expected number of stock-outs per order * number of orders per year)
The expected number of stock-outs per order reflects the various levels by which demand during the lead time could exceed the re-order level.”

Followed by this example –
“Possibility of stock-outs

If re-order level is 4 units, but there is a probability of 0.2 that demand during the lead time would be 5 units, and 0.05 that demand during the lead time would be 6 units, then expected number of stock-outs =((5 – 4) * 0.2) + ((6 – 4) * 0.05) = 0.3.
(Stock-outs are defined as the number of units not available in inventory when required.)”

I don’t understand the explanation. They don’t calculate the cost of stock outs entirely as you can see. Please, help me out here.

Can I use this formula to calculate the costs of holding buffer inventory per annum?

Costs of holding buffer inventory per annum = (Re-order quantity/2) * Cost of holding per unit of inventory per annum