Question

Burger Prince buys top-grade ground beef for $1.00 per pound. A large sign over the entrance guarantees that the meat is fresh daily. Any leftover meat is sold to the local high school cafeteria for 80 cents per pound. Four hamburgers can be prepared from each pound of meat. Burgers sell for 60 cents each. Labor, overhead, meat, buns, and condiments cost 50 cents per burger. Demand is normally distributed with a mean of 302 pounds per day and a standard deviation of 51 pounds per day. What daily order quantity is optimal? (Hint: Shortage cost must be in dollars per pound.) (Round your answer to 1 decimal place.)

Use Table.

Optimal daily order quantity

lb.

Answer 1

This is single Period model best used to procuring meat, vegetables and other perishable items. Here two costs are given priority -excess cost and shortage cost.
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