The store manager at Meteksan Market places weekly orders for lettuce at a price of 0.30 $ per lettuce. Orders are received on every Monday morning. Continuously during the week, the manager uses Monday's deliveries to fill the customer demand. The demand during the week follows a normal distribution with mean 30 and a standard deviation of 10 lettuces. The manager says that according to their order quantity at the beginning of the week only 15% of the week’s customers face a lettuce stockout. Unsold lettuces are discarded every Sunday night at an additional cost of 0.05 $ per lettuce.

a) What is the probability that all arriving customers will be able to buy a lettuce?

b) In order to justify the management's policy, what should be the number of lettuces bought by the beginning of each week?

c) In order to justify the management's policy of having 15% stockouts, what should be the sale price of lettuce?

d) If Meteksan can give the unsold lettuces for free without incurring the additional discarding cost of 0.05 $ per lettuce, then would they buy more or fewer (less number of) lettuces? Explain your reasoning without making new calculations.

Answer rating: 100% (QA)

Part a It is given that 15 of the customers face problem of stock therefore 1001585 of customers do ... View the full answer