Answered: A firm uses a one-week periodic review…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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A firm uses a one-week periodic review inventory system. A two-day lead time is needed for any order, and the firm is willing to tolerate an average of one stock-out per year.
a. Using the firm’s service guideline, what is the probability of a stock-out associated with each replenishment decision?
b. What is the replenishment level if demand during the review period plus lead-time period is normally distributed with a mean of 60 units and a standard deviation of 12 units?
c. What is the replenishment level if demand during the review period plus lead-time period is uniformly distributed between 35 and 85 units?

Features Features Normal distribution is characterized by two parameters, mean (µ) and standard deviation (σ). When graphed, the mean represents the center of the bell curve and the graph is perfectly symmetric about the center. The mean, median, and mode are all equal for a normal distribution. The standard deviation measures the data's spread from the center. The higher the standard deviation, the more the data is spread out and the flatter the bell curve looks. Variance is another commonly used measure of the spread of the distribution and is equal to the square of the standard deviation.

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