When excess cost is equal to shortage cost in the single period model,the optimum stocking level falls in the center of the demand distribution for the item.

Question

Quizplus · Accepted Answer

When excess cost is equal to shortage cost in the single period model, the optimal stocking level is determined by finding the point where the expected shortage cost is equal to the expected excess cost. This point will be in the center of the demand distribution because the distribution is symmetric around the mean.

When Excess Cost Is Equal to Shortage Cost in the Single