Daily Demand for a Product Is Normally Distributed with a Mean

question 100

Essay

Daily demand for a product is normally distributed with a mean of 150 units and a standard deviation of 15 units. The firm currently uses a reorder point system, and seeks a 75% service level during the lead time of 6 days.
a. What safety stock is appropriate for the firm?
b. What is the reorder point?

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Definitions:

Long-Run Aggregate Supply Curve

A graphical representation showing the relationship between the overall price level and the total output produced by an economy when all factors of production are variable.

Sticky Price Theory

An economic theory suggesting that prices of goods do not adjust immediately to changes in supply and demand, leading to disequilibrium in the market.

Sticky Wage Theory

The hypothesis that wages do not adjust quickly to changes in economic conditions, leading to unemployment and other inefficiencies.

Price Level

A measure of the average prices of goods and services in an economy at a given time, often monitored to understand inflation and the cost of living.