In Setting the Reorder Point for an Item with Variable

question 5

Multiple Choice

In setting the reorder point for an item with variable demand,a service level of 95% will imply which of the following?

• A)Stockouts may occur only 5 times during the phase of 100 inventory cycles.
• B)Five percent (5%)of the supplier shipments will be late.
• C)There is a 0.05 probability that the forecasted demand is not accurate.
• D)The forecast demand will be accurate 95% of the time.

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Definitions:

Entrepreneurs

Individuals who take the initiative to start and manage a business, taking on financial risks with the aim of making a profit.

Purely Competitive

A market structure characterized by many buyers and sellers, free entry and exit, and a homogeneous product, leading to no single buyer or seller having control over prices.

Economic Profits

Economic profits refer to the excess income earned by firms after accounting for both explicit and implicit costs, serving as a measure of efficiency and profitability.

Creative Destruction

A process where new innovations lead to the demise of older technologies or businesses, driving economic growth and progress.