A sales office of Helms, Inc., has developed the following probability distribution for daily sales of a perishable product.
| X (Units Sold) |
P (Sales = X) |
| 100 |
0.2 |
| 150 |
0.5 |
| 200 |
0.2 |
| 250 |
0.1 |
The product is restocked at the start of each day. If the company desires a 90% service level in satisfying sales demand, the initial stock balance for each day should be:
Solution:
The probability of demand being greater than 200 units is 10%. Therefore, the probability that sales will be 200 units or less is 90% (100% − 10%). The 90% probability for sales of 200 or less units could also be determined by adding the individual probabilities for sale of 200 units or less (0.2 + 0.5 + 0.2).
Appreciate, If someone can help me to understand the concept, please?
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Zubair
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