Question

The monthly sales of mufflers follow the normal distribution with a mean of 1120 and a standard deviation of 210. The manufacturer would like to establish inventory levels such that there is only a 7% chance of running out of stock.

 

Where should the manufacturer set the inventory levels?

Answer 1

 

Z=(X-1120)/210 is the Z score for an inventory level of X.

We need Z for 100-7=93% probability of not running out of stock.

Z=1.4758 for P(Z)=0.93.

Therefore X=210×1.4758+1120=1430 approx.