EBK OM
6th Edition
ISBN: 9781305888210
Author: Collier
Publisher: YUZU
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Chapter 11, Problem 14PA
Summary Introduction
Interpretation: Change in optimal quantity
Concept Introduction: Single period inventory model is also term as News Vendor model. It is a situation in the business where they order during seasonal demand. It is the situation where the firms orders a good in anticipation of selling that item in future where demand is uncertain.
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Suppose that the owner of the campus bar, Nick’s, has determined that demand for beer during leadtime averages 5000 bottles. Nick, the owner, believes the demand during lead time can be describedby a normal distribution with a mean of 5000 bottles and a standard deviation of 300 bottles. Nick iswilling to accept a stockout risk of approximately 4 percent. Determine the appropriate z value to use.Calculate how much safety stock Nick should hold. Also determine the reorder point.
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