The local supermarket buys lettuce each day to ensure really fresh produce. Each
ID: 358787 • Letter: T
Question
The local supermarket buys lettuce each day to ensure really fresh produce. Each morning any lettuce that is left from the previous day is sold to a dealer that resells it to farmers who use it to feed their animals. This week the supermarket can buy fresh lettuce for $8.00 a box. The lettuce is sold for $16.00 a box and the dealer that sells old lettuce is willing to pay $1.80 a box. Past history says that tomorrow's demand for lettuce averages 245 boxes with a standard deviation of 38 boxes. How many boxes of lettuce should the supermarket purchase tomorrow? (Use Excel's NORMSINV() function to find the correct critical value for the given -level. Do not round intermediate calculations. Round your answer to the nearest whole number.)
Explanation / Answer
Marginal profit, p = 16 - 8 = 8 this is also called shortage cost, Cu
Marginal cost, c = 8 - 1.8 = 6.2. this is also called excess oor overage cost, Co
-level = p/(p+c) = 8/(8+6.2) = 0.5634
Critical value, z = NORMSINV(0.5634) = 0.1596
Boxes of lettuce supermarket should purchase tomorrow = m + z*s
= 245 + 0.1596*38
= 251 boxes
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