94 a Product's Usage Is Normally Distributed with a Weekly

question 52

Multiple Choice

94. A product's usage is normally distributed with a weekly average demand of 2,000 units and a weekly standard deviation of 125. The product's lead time is 4 weeks. Currently, the reorder point for this product is 8,200. If the company would like to have a service level of 95% for this product then

• A) it must decrease its safety stock by approximately 412 units.
• B) it must decrease its safety stock by approximately 212 units.
• C) it must increase its safety stock by approximately 412 units.
• D) it must increase its safety stock by approximately 212 units.

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Definitions:

Marginal Cost

The additional charge of creating one more unit of a product or service.

Peak-Load Pricing

A pricing strategy that involves adjusting prices in response to fluctuations in demand, particularly during peak usage times.

Marginal Cost

The expense associated with the production of an extra unit of a product or service.

Rebates

Rebates are partial refunds to purchasers of products or services, often used as a promotional tool by marketers to increase sales or the perceived value of a product.