Question: One important factor in inventory control is the variance of the daily demand for the product. A management scientist has developed the optimal order quantity

One important factor in inventory control is the variance of the daily demand for the product. A management scientist has developed the optimal order quantity and reorder point, assuming that the variance is equal to 250. Recently, the company has experienced some inventory problems, which induced the operations manager to doubt the assumption. To examine the problem, the manager took a sample of 25 days and recorded the demand.

a. Do these data provide sufficient evidence at the 5% significance level to infer that the management scientist’s assumption about the variance is wrong?

b. What is the required condition for the statistical procedure in Part a?

c. Does it appear that the required condition is not satisfied?

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