The weed killer company uses 30 gallons (demand rate) of weed kill per day. The supply of weed kill is replenished when the amount on hand is 170 gallons (reorder point). After an order is placed, it takes about 4 days on average to receive the order. Safety stock is 50 gallons, which provides a stockout risk of 9.01%. What amount of safety stock would provide a stockout risk of 4.01%? Assume the lead time is distributed normally: therefore, the lead time will have a standard deviation that you need to initially solve for.
The weed killer company uses 30 gallons (demand rate) of weed kill per day. The supply of weed kill is replenished when the amount on hand is 170 gallons (reorder point). After an order is placed, it takes about 4 days on average to receive the order. Safety stock is 50 gallons, which provides a stockout risk of 9.01%. What amount of safety stock would provide a stockout risk of 4.01%? Assume the lead time is distributed normally: therefore, the lead time will have a standard deviation that you need to initially solve for.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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The weed killer company uses 30 gallons (demand rate) of weed kill per day. The supply of weed kill is replenished when the amount on hand is 170 gallons (reorder point). After an order is placed, it takes about 4 days on average to receive the order. Safety stock is 50 gallons, which provides a stockout risk of 9.01%. What amount of safety stock would provide a stockout risk of 4.01%? Assume the lead time is distributed normally: therefore, the lead time will have a standard deviation that you need to initially solve for.
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