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Suppose Management Decides It Wants to Offer a 95% Service

question 5

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Suppose management decides it wants to offer a 95% service level.That is,Cooper Company is willing to experience a stock-out probability of 5% during the order cycle.How much safety stock should be carried?


Definitions:

Bank Discount

What the bank charges to hold a note until maturity (Maturity Value – Proceeds).

Discount Period

The window of time during which a payment can be made at a reduced rate.

Maturity Value

Maturity value is the amount payable to an investor at the end of a debt instrument's holding period or its maturity date, including principal and interest.

Bank Discount

An interest deduction made in advance from a loan amount by the lender, often used in the context of Treasury bills.

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