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David's Delicatessen flies in Hebrew National salamis regularly to satisfy a grow - ing demand for the salamis in Silicon Valley. The owner, David Gold,
David's Delicatessen flies in Hebrew National salamis regularly to satisfy a grow ing demand for the salamis in Silicon Valley. The owner, David Gold, estimates that the demand for the salamis is pretty steady at per month. The salamis cost Gold $ each. The fixed cost of calling his brother in New York and having the salamis flown in is $ It takes three weeks to receive an order. Gold's account ant, Irving Wu recommends an annual cost of capital of percent, a cost of shelf space of percent of the value of the item, and a cost of percent of the value for taxes and insurance. a How many salamis should Gold have flown in and how often should he order them? b How many salamis should Gold have on hand when he phones his brother to send another shipment? c Suppose that the salamis sell for $ each. Are these salamis a proffable item for Gold? If so what annual profit can he expect to realize from this item? Assume that he operates the system optimally. d If the salamis have a shelf life of only weeks, what is the trouble with the pol icy that you derived in part a What policy would Gold have to use in that case? Is the item still profitable?
David's Delicatessen flies in Hebrew National salamis regularly to satisfy a grow ing demand for the salamis in Silicon Valley. The owner, David Gold, estimates that the demand for the salamis is pretty steady at per month. The salamis cost Gold $ each. The fixed cost of calling his brother in New York and having the salamis flown in is $ It takes three weeks to receive an order. Gold's account ant, Irving Wu recommends an annual cost of capital of percent, a cost of shelf space of percent of the value of the item, and a cost of percent of the value for taxes and insurance.
a How many salamis should Gold have flown in and how often should he order them?
b How many salamis should Gold have on hand when he phones his brother to send another shipment?
c Suppose that the salamis sell for $ each. Are these salamis a proffable item for Gold? If so what annual profit can he expect to realize from this item? Assume that he operates the system optimally.
d If the salamis have a shelf life of only weeks, what is the trouble with the pol icy that you derived in part a What policy would Gold have to use in that case? Is the item still profitable?
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