Answered: Kelly’s Tavern serves Shamrock draft…

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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Question

Kelly’s Tavern serves Shamrock draft beer to its customers.
The daily demand for beer is normally distributed, with an
average of 20 gallons and a standard deviation of 4 gallons.
The lead time required to receive an order of beer from the
local distributor is 12 days. Determine the safety stock and

reorder point if the restaurant wants to maintain a 90% ser-
vice level. What would be the increase in the safety stock if

a 95% service level were desired?

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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