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Bilbo owns a gas station. He refills his gas tank once a day early in the...

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General Management

Bilbo owns a gas station. He refills his gas tank once a dayearly in the morning. Historical data show that daily demand at hisgas station is relatively stable and has mean = 1000 gallons andstandard deviation = 200 gallons. His gas tank has a capacity ofholding up-to 3000 gallons of gasoline so that is not an issue.Holding gasoline will occupy financial resources, though, andtherefore Bilbo does not want to hold too much gasoline in histank. He wants to maintain a service level of 90%; that is, hewants to have a 90% chance that he does not run out of gas on anyday and only wants a 10% chance to face angry customers by runningout inventory. How much gas should Bilbo hold by refilling his tankat the begining of the day? (Hint: use the NORMINV or NORMSINVfunction on Excel to find out where the 90th percentile is underthe given normal distribution.)

Group of answer choices

A: =NORMINV(0.9,200,1000) = 1481.55 gallons

B: =1000+200*NORMSINV(0.9) = 1256.31 gallons

C: =1000+200*0.9 = 1180 gallons

D: =1000*NORMSINV(0.9) = 1281.55 gallons

Answer & Explanation Solved by verified expert
3.7 Ratings (481 Votes)
Theory Norminv returns the inverse of normal cumulative distribution for a specified mean and standard deviation Has 3 parameters of probability mean and standard deviation    See Answer
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