Question

In a single period order quantity model, if the shortage cost is four times the overage cost, then, (A) what is the optimal service level (i.e., critical fractile)?, and (B) using the optimal service level from part (A), what is the optimal order quantity if the demand is normally distributed with a mean of 70 and variance of 9? Round your final answer to the nearest integer.

Answer 1

If immature value is on top of an average prices, it implies that if the vendor isn't ready to offer the merchandises on demand the loss are going to be four times than value of the product sustains in record. So, it's suggest-able that sustain record in stores supported demand.

a) The optimum service level are going to be 95%

b) 79 units will be the optimal order quantity.