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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?


Definitions:

Fixed Asset Turnover Ratio

This ratio measures how effectively a company uses its fixed assets to generate sales, calculated as net sales divided by average fixed assets.

Net Operating Income

A calculation used to analyze the profitability of income-generating real estate investments, which subtracts all operating expenses from all revenue generated from properties.

Average Net Fixed Assets

The average value of a company's property, plant, and equipment (PP&E) net of accumulated depreciation over a certain period.

Intangible Asset

An asset that lacks physical substance but is identifiable and provides economic benefits, such as patents or trademarks.

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