The local supermarket buys lettuce each day to ensure really fresh produce. Each
ID: 455276 • 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 $3.00 a box. The lettuce is sold for $11.00 a box and the dealer that sells old lettuce is willing to pay $1.10 a box. Past history says that tomorrow's demand for lettuce averages 225 boxes with a standard deviation of 32 boxes. Required: How many boxes of lettuce should the supermarket purchase tomorrow?
Explanation / Answer
Average Daily Demand = 225
Standard Deviation of Daily Demand = 32
Safety Stock = z * SD = 2.045 * 32 = 65 (Assuming 98% service level)
Order Quantity = (225 *1)+65 = 290 boxes
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