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22 July, 06:19

A certain company reorders envelopes when it stock drops to 15 boxes, although demand for envelopes during lead time is normally distributed with a mean of 10 boxes and a standard deviation of 3 boxes. Which of the following is closest to the probability of this company stocking out before a new order of envelopes arrives?

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  1. 22 July, 06:30
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    Question: The options were not given in the question. here are the options;

    a. 50%

    b. 75%

    c. 5%

    d. 95%

    e. 25%

    Answer:

    The correct option is D. 95%

    Explanation:

    ROP = demand during lead time + (Z * standard deviation of lead time demand)

    15 = 10 + (Z * 3)

    Z = 1.667

    For Z = 1.667, service level is nearly 95%
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