Matthew has a vegetable stall in the Farmer's market. Every Saturday he purchases Lettuce in boxes from a farmer for $4.00 per box. When the market opens he sells the lettuce boxes at $10.00 per box. After the close of the market, he has to sell the remaining lettuce at $1.50 per box.
The demand varies from Saturday to Saturday. Matthew has maintained a record of past sales and he knows that on average he sells 250 boxes per day with a standard deviation of 34 boxes for a normal distribution of demand.
Matthew wants to know what is the optimum quantity he should take to the market so that his profit is maximized.
What is the stock-out risk associated with this quantity?

Answer rating: 100% (QA)

1 Calculate EOQ Economic Order Quantity Demand D 250 boxes Ordering co... View the full answer