In a single-period model, if shortage and excess costs are equal, then the optimum service level is
A)0.
B)0.33.
C)0.50.
D)0.67.
E)0.75.

Question

Quizplus · Accepted Answer

In a single-period model where shortage and excess costs are equal, the optimum service level is 0.50 or 50%. This is because the cost of overestimating demand is balanced by the cost of underestimating it, leading to a 50% service level as the point where expected costs are minimized.

In a Single-Period Model, If Shortage and Excess Costs Are