Question: Deep Six Seafood, a restaurant that is open 360 days a year, specializes in fresh Maine lobsters at a cost of $ 10 each. Air

Deep Six Seafood, a restaurant that is open 360 days a year, specializes in fresh Maine lobsters at a cost of $ 10 each. Air freight charges have increased signifi-cantly, and it now costs Deep Six $ 48 to place an order. Because the lobsters are shipped live in a saltwater tub, the order cost is not affected by order sizes. The cost to keep a lobster alive until needed runs about $ 0.02 per day. The demand for lobsters during the 1- day lead time is as follows:
Lead- Time Demand Probability
0........... .05
1........... .10
2........... .20
3........... .30
4........... .20
5........... .10
6........... .05
a. Deep Six would like to reconsider its order size. What would you recommend as an EOQ?

b. The Maine distributor is willing to give Deep Six a $ 0.50 discount on each lobster if orders are placed in lots of 360 each. Should Deep Six accept this offer?

c. If Deep Six insists on maintaining a safety stock of 2 lobsters, what is the service level?

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