The forecasted mean daily demand for a product is 5210 units, the mean lead time
ID: 2803895 • Letter: T
Question
The forecasted mean daily demand for a product is 5210 units, the mean lead time is 8 days, and the standard deviation of forecast error during lead time is 1235 units. What is the service level for this product when the reorder point is 45130 units?
2.79%
77.94%
99.74%
None of the above
2 points
QUESTION 51
A product has a mean demand of 50 with a standard deviation of 4. If the retailer wants to maintain a 99% customer service, how many units will they need to keep in stock?
54
59
98
62
2.79%
77.94%
99.74%
None of the above
Explanation / Answer
1) The answer is d) none of the above. Working is provided below:
Mean Daily Demand (d)=5210
Mean Lead Time (L) =8 days
Standard Deviation () =1235
Reorder Point (R) can be stated as:
R=dL+zL
45130=5210×8+z×1235×8
45130=41680+3493.10z
3450=3493.10z
z=0.9876
z value 0.9876 corresponds to 0.8365 from z table =83.65%
2) The correct answer is b 59. Working provided below:
The formula for safety stock:
Average Demand+ Safety Stock (×z)
z value for 99 % confidence= 2.33
=50+4×2.33
=59.32 =59
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