A Product's Usage Is Normally Distributed with a Weekly Average

question 74

Multiple Choice

A product's usage is normally distributed with a weekly average demand of 2,000 units and a weekly standard deviation of 125.The product's lead time is 4 weeks.Currently,the reorder point for this product is 8,200.If the company would like to have a service level of 95% for this product then

• A)it must decrease its safety stock by approximately 412 units.
• B)it must decrease its safety stock by approximately 212 units.
• C)it must increase its safety stock by approximately 412 units.
• D)it must increase its safety stock by approximately 212 units.

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Definitions:

Cost-Plus-Percentage-Of-Cost Pricing

A pricing method where the seller determines the price by adding a specific percentage of the production cost per unit on top of the total cost to ensure profit.

Real Estate

Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water.

Power Company

An entity that generates, transmits, and distributes electricity to consumers and businesses within a specific area or region.

Cost-Oriented Approach

A pricing strategy where the price of a product is determined based on the cost of production plus a markup percentage for profit.