4. The Reorder Point and The Newsvendor Model: a. [10 points] For Crunchy Super Store is Question 2., suppose that the daily demand for cereals is normally distributed with an average daily demand of 100 boxes and a standard deviation of 5 boxes of cereals per day. The lead time for receiving a new order of cereals is 9 days. The holding cost is 60 cents per box per year. Calculate demand during lead time, the standard deviation of demand during lead time, the risk of stockout, safety stock, and reorder point if the store wants a service level of 95%. Calculate the annual carrying cost of the safety stock. b. [10 points] As the owner of Fresh Fish & Seafood Shop, you can purchase fresh salmon at $20 per crate and tuna at $40 per crate each morning from the Walter Fish Market. During the day, you sell the salmon at $120 per crate and tuna at $160 per crate to local restaurants. If at the end of the day your end up with any unsold crates, you salvage each unsold salmon crate at $5 and each tuna crate at $10. You believe that the demand for salmon follows the normal distribution, with a mean of 10 crates per day and a standard deviation of 2 crates per day, and that the demand for tuna is uniformly distributed between 5 and 10 crates per day. i. Determine the cost of underestimating demand for salmon, the cost of overestimating the demand for salmon, the service level and the risk of stockout for salmon. Determine the cost of underestimating demand for tuna, the cost of overestimating the demand for tuna, the service level and the risk of stockout for tuna. ii. Compute the safety stock for salmon. Compute the safety stock for tuna!. Determine the optimal number of crates for salmon and tuna you should purchase each morning. 4. The Reorder Point and The Newsvendor Model: a. [10 points] For Crunchy Super Store is Question 2., suppose that the daily demand for cereals is normally distributed with an average daily demand of 100 boxes and a standard deviation of 5 boxes of cereals per day. The lead time for receiving a new order of cereals is 9 days. The holding cost is 60 cents per box per year. Calculate demand during lead time, the standard deviation of demand during lead time, the risk of stockout, safety stock, and reorder point if the store wants a service level of 95%. Calculate the annual carrying cost of the safety stock. b. [10 points] As the owner of Fresh Fish & Seafood Shop, you can purchase fresh salmon at $20 per crate and tuna at $40 per crate each morning from the Walter Fish Market. During the day, you sell the salmon at $120 per crate and tuna at $160 per crate to local restaurants. If at the end of the day your end up with any unsold crates, you salvage each unsold salmon crate at $5 and each tuna crate at $10. You believe that the demand for salmon follows the normal distribution, with a mean of 10 crates per day and a standard deviation of 2 crates per day, and that the demand for tuna is uniformly distributed between 5 and 10 crates per day. i. Determine the cost of underestimating demand for salmon, the cost of overestimating the demand for salmon, the service level and the risk of stockout for salmon. Determine the cost of underestimating demand for tuna, the cost of overestimating the demand for tuna, the service level and the risk of stockout for tuna. ii. Compute the safety stock for salmon. Compute the safety stock for tuna!. Determine the optimal number of crates for salmon and tuna you should purchase each morning
