In order to derive the probability of stock outs, divide the total value of the stock outs by the number of requests demanded. The resulting figure must then be multiplied by 100.
What is a stock out?
In business, a stock out refers to a condition where in a certain item or items are no longer available in stock.
The formula can be sated simply as:
Probability of Stock outs = (No of stock outs/ number of demand requests) x 100
Thus Number of Stock outs = Total probability of stock outs * total number of demand requests.
What is the formula for the Total Cost?
The formula for Total Cost is given as:
Total Fixed Cost + Total Variable Cost;
TC = TFC + TVC
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