Assignment:
Please answer within 90 mins of posting.
Blue Mountain coffee company sells gourmet coffee in 50lb bags. They have an ordering cost of $35 per order and the carrying cost is S18 per bag per year. To meet the demand, Blue Mountain places orders in large quantities 7 times a year. The stockout cost is estimated to be $45 per bag. Over the past several years, they have observed the following demand during the lead time for their coffee:
|
Demand During Lead Time(Bags)
|
Probability
|
|
10
|
0.1
|
|
20
|
0.2
|
|
30
|
0.2
|
|
40
|
0.2
|
|
50
|
0.2
|
|
60
|
0.1
|
The reorder point is 30 bags without safety stock. What level of safety stock should be maintained?
The optimal quantity of safety stock which minimizes the expected total cost is bags (enter your response as a whole number).