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The selling price for these masks is $20 while the cost to the retailer is $12. Masks left over at the end of the short
The selling price for these masks is $20 while the cost to the retailer is $12. Masks left over at the end of the short selling season are sold at a special discount price of $10 per mask. The manager of the store assumes that demand is normally distributed with mean 400 and standard deviation 50. He chooses an order quantity of 400 plus twice the standard deviation, citing the need for high customer service. Customer service level' is measured by the 'probability that all demand for the product is satisfied by the stock on hand'. Equivalently, it is equal to the 'probability that there will be no stock outs' (a) What customer service level does the retailer achieve with his choice of order quantity? (b) What is the optimal order quantity, and what level of customer service level would the retailer achieve if he were to order the optimal quantity
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