A local farm sells freshly cut Christmas trees to its customers in the neighborhood. It purchases all
Question:
A local farm sells freshly cut Christmas trees to its customers in the neighborhood. It purchases all the trees the farm needs for that season at the end of October for $25 each. The selling price to customers is always $55 per tree. The farm orders no additional trees regardless of customer demand, i.e. customers will be turned away if no more trees are left. However, if there are any trees left unsold after Christmas, it will cost the farm $1.50 per tree to transport them to a paper-mill in New Hampshire, and selling for $2 per tree. The owner keeps a clear record of the demand pattern in the previous years: the average yearly demand for Christmas trees at the farm is 100 trees, with a standard deviation of 8.
Please determine the optimal number of trees that the farm should order in October for this upcoming season.
Operations Management Processes And Supply Chains
ISBN: 9781292409863
13th Global Edition
Authors: Lee Krajewski, Naresh Malhotra, Larry Ritzman