A perishable dairy product is ordered daily at a particular supermarket. The product, which costs $1.23 per unit, sells for $1.74 per unit. If units are unsold at the end of the day, the supplier takes them back at a rebate of $1 per unit. Assume that daily demand is approximately normally distributed with µ = 145 and σ = 25.Note: Use Appendix B to identify the areas for the standard normal distribution. What is your recommended daily order quantity for the supermarket? Round your answer to the nearest whole number.Q* = fill in the blank 1What is the probability that the supermarket will sell all the units it orders? Round your answer to three decimal places.P(Stockout) = fill in the blank 2In problems such as these, why would the supplier offer a rebate as high as $1? For example, why not offer a nominal rebate of, say, 25¢ per unit? What happens to the supermarket order quantity as the rebate is reduced?The lower rebate the quantity that the supermarket should order.

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A perishable dairy product is ordered daily at a particular supermarket. The product, which costs $1.23 per unit, sells for $1.74 per unit. If units are unsold at the end of the day, the supplier takes them back at a rebate of $1 per unit. Assume that daily demand is approximately normally distributed with µ = 145 and σ = 25.

Note: Use Appendix B to identify the areas for the standard normal distribution.

What is your recommended daily order quantity for the supermarket? Round your answer to the nearest whole number.

Q^* = fill in the blank 1
What is the probability that the supermarket will sell all the units it orders? Round your answer to three decimal places.

P(Stockout) = fill in the blank 2
In problems such as these, why would the supplier offer a rebate as high as $1? For example, why not offer a nominal rebate of, say, 25¢ per unit? What happens to the supermarket order quantity as the rebate is reduced?

The lower rebate the quantity that the supermarket should order.

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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