Given a lot size of Q (which is also the average demand in a replenishment cycle),
A)the fraction of demand lost is thus ESC + Q.
B)the fraction of demand lost is thus ESC - Q.
C)the fraction of demand lost is thus ESC/Q.
D)the fraction of demand lost is thus ESC × Q.

Question

Quizplus · Accepted Answer

The fraction of demand lost is represented by the term (ESC/Q). This is because ESC (which stands for expected shortage cost) is a cost, and we need to divide it by the quantity of demand Q to get a fraction. Options A, B, and D do not correctly represent the calculation of the fraction of demand lost.

Given a Lot Size of Q (Which Is Also the Average