The manager of a bakery orders three \'cake-to-go\' wedding cakes every Saturday
ID: 2477098 • Letter: T
Question
The manager of a bakery orders three 'cake-to-go' wedding cakes every Saturday to accommodate last minute purchases. Demand for the cakes can be described by a Normal distribution that has a mean of 200 and standard deviation of 10. The cakes cost $10 each to prepare, and they sell for $15 each. Any cakes that haven't been sold by the end of the day are sold for half price the next day. What stocking level would be appropriate? The manager of a bakery orders three 'cake-to-go' wedding cakes every Saturday to accommodate last minute purchases. Demand for the cakes can be described by a Normal distribution that has a mean of 200 and standard deviation of 10. The cakes cost $10 each to prepare, and they sell for $15 each. Any cakes that haven't been sold by the end of the day are sold for half price the next day. What stocking level would be appropriate? The manager of a bakery orders three 'cake-to-go' wedding cakes every Saturday to accommodate last minute purchases. Demand for the cakes can be described by a Normal distribution that has a mean of 200 and standard deviation of 10. The cakes cost $10 each to prepare, and they sell for $15 each. Any cakes that haven't been sold by the end of the day are sold for half price the next day. What stocking level would be appropriate?Explanation / Answer
Safety stock level is used to cover uncertainty in demand. It is set by increasing the reordering point by the amount of safety stock. Safety Stock equals Z*Standard deviation of demand during the lead time. So we need to calculate Z. Suppose if there is a 5% chance of stock running out then value of z=1.65. Hence, Safety Stock = 1.65*10
=16.5 ( rounded of to 17)
So ROP = 200+17=217
Given safety stock =3
So, Z=safety stock/standard deviation
Z=3/10
Or, z=.30
NORMSDIST (.30)= .3821
So Safety stock equals to 10*.3821=3.821 ( rounded off to 4)
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.