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A retailer sells the Ultra-Man toy robot. The demand for the product follows a normal distribution with a mean of 15 units per day and a standard deviation of 5 units per day. The unit cost of the product is $60, the ordering cost is $50 with a four (4) day lead time, and the annual storage cost is $10 per toy. The retailer operates 312 days per year (six days per week).
Assume that the firm uses a continuous revision inventory system (i.e. fixed quantity) and wishes to maintain a safety stock of 25 robots. What is the service level p (the probability of not running out during the delivery time)?
Could you please explain your answer?
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