[LadyBo]

Hi.
First and foremost here's the question:

A wholesale warehouse has a variable demand for one of its product lines. Past records suggest that the weekly demand is appriximately normal with a mean of 500 units with a standard deviation of 80.

a) the warehouse has 600 units in stock and the next delivery is expected in a week's time. Estimate the probability of the warehouse running out of stock before the next delivery arrives

b) In future the warehouse wants to place an order for this product from its suppluer when the stock level falls to a pre-determined level. The lead time (between placing and recieveing an order) is one week. The probaility of running out in any lead time is to be no more than 0.05. What should the reorder level be if the pattern of demand stays the same?


I don't know how to start this question. A little direction would help me please!

[galactus]

Use the formula

For the first one, you have x, mean, and SD. Look up the probability in the z table.

For the second one. Look up the z-score for .05 and solve for x.

[LadyBo]

Use the formula

For the first one, you have x, mean, and SD. Look up the probability in the z table.

For the second one. Look up the z-score for .05 and solve for x.

I still don't understand it!
Thanks 4 your help, much appreciated