Daily Demand for a Product Is Normally Distributed with a Mean

question 81

Essay

Daily demand for a product is normally distributed with a mean of 55 units and a standard deviation of 6 units. The firm currently uses a reorder point system, and seeks a 75% service level during the lead time of 4 days.
a. What safety stock is appropriate for the firm?
b. What is the reorder point?

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Definitions:

Revenue And Expense

Financial terms identifying the income a company generates and the costs incurred to generate that income, respectively.

Earnings Per Share

A financial metric that gauges the portion of a company's profit allocated to each outstanding share of common stock.

Common Stock

Equity ownership in a corporation, with voting rights and eligibility to receive dividends.

Profitability

A measure of how much profit a company generates relative to its revenue or assets.