A. Pet Place sells pet food and supplies including a popular bailed hay for hors

Question

A. Pet Place sells pet food and supplies including a popular bailed hay for horses. When the stock of this hay drops to 20 bails, a replenishment order is placed. The store manager is concerned that sales are being lost due to stock outs while waiting for a replenishment order. It has been previously determined that demand during the lead-time is normally distributed with a mean of 15 bails and a standard deviation of 6 bails. The manager would like to know the probability of a stockout during replenishment lead-time. In other words, what is the probability that demand during lead-time will exceed 20 bails? Compute to 2 decimal places.

B. If the manager of Pet Place wants the probability of a stockout during replenishment lead-time to be no more than 0.05, what should the reorder point be? Compute to the nearest whole number [just type the number with no decimal].

Explanation / Answer

a)

P( x > 20 )

P( z > [20-15] / 6 )

P( z > 0.83) = 0.2033

b)

P( z < z) = 0.05

z = -1.64

-1.64 = [ x-15] / 6

x = 5.16

x = 5

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