In a single period model,if shortage and excess costs are equal,then the optimum service level is:
A)0
B).33
C).50
D).67
E).87

Question

Quizplus · Accepted Answer

In a single period model, the optimum service level is the one that balances the costs of shortage and excess. If these costs are equal, then the optimal service level would be at the midpoint, which is .50 or 50%. This means that half of the demand will be met and half will be lost. Choosing any other service level will result in a higher total cost.

In a Single Period Model,if Shortage and Excess Costs Are