A Bakery's Use of Corn Sweetener Is Normally Distributed with a Mean

question 117

Essay

A bakery's use of corn sweetener is normally distributed with a mean of 80 gallons per day and a standard deviation of four gallons per day. Lead time for delivery of the corn sweetener is normal, with a mean of six days and a standard deviation of two days. If the manager wants a service level of 99 percent, what reorder point should be used?

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Definitions:

Standard Deviation

A statistical measure of the dispersion or variability of a set of data points, representing the average difference from the mean; widely used in finance as a measure of investment risk.

Arbitrage Opportunity

The chance to buy an asset at a low price in one market and simultaneously sell it at a higher price in another, securing a risk-free profit.

Long-short Equity Fund

A type of investment fund that takes both long and short positions in stocks, aiming to profit from increases in the prices of some stocks and decreases in the prices of others.

Risk-free Rate

The theoretical rate of return on an investment with zero risk, typically represented by U.S. Treasury securities.