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In a single-period model, if shortage cost is four times excess cost, then the optimum service level is ___ percent.

Respuesta :

Answer:

80%

Explanation:

In the question it is given that the shortage cost is 4 times the excess cost

So shortage cost =4 excess cost

The critical ratio or optimum service level is given by

[tex]C=\frac{shortage\ cost}{shortage\ cost+excess\ cost}[/tex]

So [tex]C=\frac{shortage\ cost}{shortage\ cost+0.25\ shortage cost}=\frac{1}{1.25}=0.8[/tex] =80%

So the optimum service level will be 80 %

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