Question

PH produces many electronics products for the USA, Europe, and the UK. The plugs required for each of these geographical areas are different, so originally PH had produced three different versions of each product. Recently, they decided to create one version, and then ship these with three different plugs (i.e., of which two are redundant for the customer). The demands for a particular item for each market are normally distributed with the following parameters: USA – average of 10,000 with a standard deviation of 1,000, Europe – average of 5,000 with a standard deviation of 1,000, and the UK – average of 5,000 with a standard deviation of 500. If PH wants a 90% service level, then how much should their safety stock be according to the new system with one version?

A: Approximately 1,900
B: Approximately 2,500
C: Approximately 3,200
D: Approximately 5,750

Answer 1

safety stock=1900

Step-by-step explanation:

Formula used:

Safety stock= Normsinv(service level) x standard deviation of demand

Solution:

On calculating standard deviation of combined demand using high school maths

standard deviation =
`√(1000^2+1000^2+500^2)`

Here on calculating the safety stock

Safety stock = Normsinv(0.90)x
`√(1000^2+1000^2+500^2)`

On simplifying,

Safety stock = 1922

Therefore,

The answer is 1900 units

Option is the correct answer

A. approximately 1900

The difference in the answer may be due to the rounding of standard normal deviation