1. The MSH sells smart home appliances. The MSH wants to determine the optimum customer service level based on profit maximization for a smart thermostat. According to the available data, sales response rate is 0.11% change in revenue for a 1% change in the service level (fill rate). The margin is $27 per thermostat, inventory carrying cost is 36% per year, average yearly sales amount is 52000 boxes. Cost of each thermostat is $160, demand standard deviation is 30 boxes for a week, and the lead time is 4 weeks.

You may show details of your calculations on the word file below or submit an excel file with the calculations to get the full credit.

1. Calculate delta_P (6Points)
2. Calculate delta_C (6 Points)
3. Calculate delta_Z (6 Points)
4. Determine the optimal customer service level? (12 Points)