Scenario 12.3 - the Cat Café

question 34

Multiple Choice

Scenario 12.3 - The Cat Café
Daily demand for cat litter at the Cat Café in Jones is 1500 ounces with a standard deviation of 300 ounces. The proprietor orders the best cat litter money can buy online, and the average shipping time is 5 days. Of course, if the order is placed at the end of the week, then it may take a while longer to receive the shipment, so the standard deviation of lead time is 2 days. The state health department keeps a close eye on the condition of the Cat Café; a cat-loving inspector visits at least twice a week, ostensibly to inspect, but mostly to pet his favorite Scottish Fold cat named Groundskeeper Willie.
-Suppose the café wishes to carry 8 days of demand as their safety inventory. What service level would they achieve?

• A) 93.9%
• B) 94.4%
• C) 95.2%
• D) 95.7%

---

Definitions:

Efficient Frontier

A concept in portfolio theory that represents the set of portfolios offering the highest expected return for a given level of risk.

Risk Aversion

A preference for avoiding losses over acquiring equivalent gains, indicating a behavior that leans towards avoiding risk.

Market Portfolio

A theoretical bundle of investments that includes every type of asset available in the market, with each asset weighted according to its total market capitalization.

Beta

A measure of a stock or portfolio's volatility in relation to the overall market, indicating its relative risk.