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:

Effective Tax Rate

The average rate at which an individual or corporation is taxed, calculated by dividing total taxes paid by the taxable income.

Cost Method

An accounting approach where investments are recorded at their original purchase cost, without adjustment for changes in market value.

Goodwill

An intangible asset that arises when a company acquires another company for a price higher than the fair value of its net identifiable assets.

Equity Method

A method of accounting in which an investor recognizes its share of the profits and losses of an investee that it influences but does not control.