Charlie\'s Pizza orders all of its pepperoni, olives, anchovies, and mozzarella

Question

Charlie's Pizza orders all of its pepperoni, olives, anchovies, and mozzarella cheese to be shipped directly from Italy. An American distributor stops by every eight weeks to take orders. Because the orders are shipped directly from Italy, they take seven weeks to arrive. Charlie's Pizza uses an average of 240 pounds of pepperoni each week, with a standard deviation of 18 pounds. Charlie's prides itself on offering only the best-quality ingredients and a high level of service, so it wants to ensure a 99 percent probability of not stocking out on pepperoni. Assume that the sales representative just walked in the door and there are currently 440 pounds of pepperoni in the walk-in cooler. How many pounds of pepperoni would you order?

Explanation / Answer

Service level P = .99, = 240, T = 8 weeks, L = 7 weeks, o = 18 per week, and I =440 lbs From Standard normal distribution, z = 2.05 q= d (t+l) + z (square root of T+L)(o)^2 - I 240(8+7) + 2.05() - 440 =

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