value: 10.00 points Problem 13-34 Demand for jelly doughnuts on Saturdays at Don
ID: 326783 • Letter: V
Question
value: 10.00 points Problem 13-34 Demand for jelly doughnuts on Saturdays at Don's Doughnut Shoppe is shown in the following table Demand Relative Demand Relative (dozens) Frequency(dozens) Frequency 01 05 12 10 19 20 21 25 26 27 28 29 10 .04 02 23 24 13 a-1. Determine the optimal number of doughnuts, in dozens, to stock if labor, materials, and overhead are estimated to be $3.25 per dozen, doughnuts are sold for $4.80 per dozen, and leftover doughnuts at the end of each day are sold the next day at half price. (Round your answer to the nearest whole number.) Optimal number of doughnuts a-2. What is the resulting service level? (Round your answer to 2 decimal places.) Service levelExplanation / Answer
Following are given data :
Unit price of doughnut = P =$4.8 per dozen
Unit cost of doughnut = C =$3.2 per dozen
Salvage price of doughnut = S = $4.8/2 = $2.4 per dozen
Underage cost = Cu = P – C = $4.8 - $3.2 = $1.6
Overage cost = Co = C – S = $3.2 - $2.4 = $0.80
Critical ratio = Cu/ Cu + Co= 1.6/(1.6 + 0.80) = 1.6/2.4 = 0.6666
Following table highlights probabilities of corresponding minimum demand quantity :
Minimum demand quantity
Probability
The nearest minimum demand quantity level whose probabilityof happening is almost 0.666 is minimum demand quantity of 23 with corresponding probability of 0.64
Therefore , Optimal number of Doughnuts to be sold = 23
OPTIMAL NUMBER OF DOUGHNUTS = 23
Service level is determined based on critical ratio
Therefore , Service level ( %) = Critical Ratio x 100 = 0.666 x 100 = 66.66%
SERVICE LEVEL = 66.66%
Minimum demand quantity
Probability
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