CMA Study Group

  • 1.  Inventory Management

    Posted 25 days ago

    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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