Answer Questions 14-15 based on the new information, given below.

Everything about Foxie Owls Besty Bagel shop still holds, except her demand distribution.

Foxie still makes fresh bagels every day for selling on that day and wants to know exactly how much should she spend on making bagels so that she can earn the most profit. All of the following previously stated information still hold true.

• Fresh bagels could be sold at $4 each when there is enough demand.

• Day-old bagels are sold at $1.50 each at the end of the day when there is not enough regular demand.

• Raw materials for each bagel is estimated at $2.50.

• To make all customers happy, Foxie Owl gives a 25 cent discount coupon to each customer when shes out of bagels, to be used the next time the customer comes back. Historically, the coupon use rate has been 100%; therefore, Foxie essentially pays out 25 cents for each customer with unmet demand

However, Foxie did some more sophisticated analysis over the past month and came back with the following demand numbers:

• Her daily demand was normally distributed, with a mean of 150, and a standard deviation of 15.

Question 14

Note that the critical ratio does not change based on the demand distribution.

You can verify that the cost of under-stocking (Cu) and the cost of over-stocking (Co) have not changed from the discrete demand distribution case.

We know that in order to maximize profit, Foxie should set her target service level equal to the critical ratio.

Because we are dealing with the normal distribution, the service level is related to the z-value.

What is the most appropriate z-value for Foxie?

Choose the closest number.

-0.35

0.25

0.25

0.35

Question 15

Based on the most appropriate z-value, how many bagels should Foxie make every day?

Choose the number closest to your calculated value.

Group of answer choices

145

150

155

175

Use the following information for Questions 16-20.

Foxie Owl has expanded her bagel business and is now considering opening a new product line consisting of packaged bagels that stay fresh longer. As a result, they can be stored in inventory and will not be salvaged at the end of the day.

The daily demand for these bagels is normally distributed, with a mean of 500 bagels per day.

The selling price of these bagels is $4.50 apiece, while the cost to make them is $3.50 apiece.

Foxie's goodwill loss (from giving out coupons) is still $0.25 for each unit of unmet demand.

Foxie's cost of holding inventory is 10% of her material cost, per day.

Foxie uses a continuous inventory monitoring policy, and places orders for a new batch of bagels on an average, every 3 days. She does not have a fixed review interval of 3 days, rather her EOQ calculation turned out to be such that the EOQ=1,500 is equal to 3 days of demand.

Foxie's supplier has a lead time of 1.5 days. The standard deviation of lead-time demand is 200.

Question 16

What is Foxie's cost of underage (or under-stocking), Cu, when (1) backorders are not allowed, and when (2) backorders are allowed?

(1) $1, (2) $1

(1) $1.25, (2) $0.25

(1) $1.25, (2) $1.25

(1) $0.25, (2) $1.25

Question 17

If Foxie places orders for a new batch of bagels every 3 days, what is her cost of over-stocking, or overage, Co?

Hint: What is the order cycle time, OCT? What is the holding cost per bagel, per unit time, H?

Most critically, ensure that the OCT and the H both have the same units of time

$0.10

$1.00

$1.05

$3.50