Question: A restaurant is purchasing all its beef from a local supplier. Weekly demand for beef averages 500 pounds. The weekly holding cost is estimated at
A restaurant is purchasing all its beef from a local supplier. Weekly demand for beef averages 500 pounds. The weekly holding cost is estimated at 30 cents per pound of beef. When the restaurant runs out of beef, it is forced to buy from the grocery store next door at about $3 per pound of beef short. To help avoid shortages, the restaurant has decided to keep enough safety stock to prevent a shortage before the delivery arrives during 95 percent of the order cycles. The restaurant's contract with the local supplier is as follows: The purchase price is $1.49 per pound. A fixed cost of $25 per order is added for shipping and handling. The shipment is guaranteed to arrive within 2 days. It is estimated that the demand for beef during this lead time has a uniform distribution from 50 to 150 pounds. (a) Derive an (R,Q) policy for the restaurant. (b) Determine the amount of safety stock provided by the policy of part (a)
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