Question: One of the kitchens in a large Las Vegas hotel complex produces fresh local fruit jam. The jam is placed into expensive jars moulded with the hotel's logo, a depiction of tumbling dice. The jam is labelled ‘Lucky Dip'. For several years a jar of ‘Lucky Dip' has been given as a complimentary gift to all guests staying in the hotel, and the marketing department feel that this promotion has been well received by guests. Some jam is also sold through the hotel's gift shop. The company accountant has provided the head chef with the following schedule that outlines the anticipated demand for jam in the next four months.

The chef likes to have 10% of next month's jam demand already produced and in stock by the month end. On 30 September, 120 jars of ‘Lucky Dip' were held as inventory. The chef runs a fruit-stocking policy of holding 5% of next month's fruit needs in inventory. On 30 September, 20 kg of fruit was held in inventory. Each jar of ‘Lucky Dip' requires 0.5 kg of fruit. It has been estimated that the fruit will cost $2 per kg during the year's final quarter.