Question

Joe’s Slop House is a little hole in the wall restaurant that serves slow-cooked barbecue beef sandwiches. The beef for the sandwiches cooks overnight, so each evening Joe decides how much beef to cook for the next day. The beef costs $4.0 a pound and Joe sells each sandwich (filled with 1 pound of beef) for $4.5. At the end of the day, any leftover beef is given to the neighborhood church for their soup kitchen. The tax deduction for this is worth $0.5 a pound. Daily demand for the beef can be approximated by a normal distribution with a mean of 280 pounds and a standard deviation of 40 pounds.

Cost of Shortage (Cs):

Cost of Excess (Ce):

What is the optimal service level?

What is the corresponding z value?

How many pounds of beef should Joe cook for the next day?

Answer 1