Single-period inventory systema local sub shop across town, Ask an Expert

Management Studies

Single-Period Inventory System

A local sub shop across town makes sandwiches every morning to sell to U.S. Cellular store employees and customers at lunch time. Sandwiches are sold for $6.25 and cost $4.25 to make and deliver to customers. It costs the sub shop $0.25 per sandwich to pick up any leftover sandwiches after lunch time, but these leftovers can be sold for $4.00 per sandwich. The average daily demand is 52 sandwiches with a standard deviation of 21 sandwiches.

What is the target service level?

Selling cost = 6.25

Purchase cost = 4.25

Left over sold price = 4

Profit = selling cost – purchase cost

(p) = 6.25 – 4.25 = 2

Loss = 4.25 – 4 = .25

2/2+.25 = .888

Service level is .888 = 81.294

How many sub sandwiches should be made each day to meet this service level?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M93133292

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