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Mark uses several bags of rice for his restaurant year. The monthly demand for rice is normally distributed with an average of 10 bags and
Mark uses several bags of rice for his restaurant year. The monthly demand for rice is normally distributed with an average of 10 bags and a standard deviation of 2 bags. It costs Mark $24 to place an order for a shipment of rice, and he spends an average of $10 each year to store a bag of rice. Suppose the lead time to receive a shipment of rice is 1 week. Assume there are 4 weeks in a month. (a) How many bags of rice should Mark order every time he places an order for more rice? (2 marks) (b) If Mark wants to provide a 95% service level, then what should be his reorder point? ( 2 marks) (c) Suppose Mark chooses not to provide a 95% service level, but rather he reorders when he has 3 bags left. What is the probability that he runs out of rice while the new shipment of rice is being delivered
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