What cycle service level does the order size proposed

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Reference no: EM132204643

You work as a clerk at Bakery #246, a Malaysian bakery specialized in using tropical fruits in their pastries. The chef baker wants to introduce a new pastry, durian cream puffs. Introducing this new pastry creates a new inventory problem for the bakery because durians have a strong smell and cannot be stored overnight in the fridge, lest they will ruin the taste of all the other food in the fridge. The durian cream would have to be ordered fresh daily.

Durian cream is purchased in pounds at RM 4.6 /lb (RM is the currency in Malaysia, and RM stands for Malaysian Ringgit). The chef predicts the demand will be 42 lbs of durian cream on average with a standard deviation of 3.36 lbs per day. You may assume that the demand is normally distributed. You estimate that each pound of durian cream will be sold at RM 12.88/lb.

Your customers love the durian cream puffs! The bakery made a lot of publicity and these puffs have become the flagship product of Bakery #246. Your boss, the chef, worries that the durian puffs will stock out too quickly and this will affect the store’s reputation. So she asked you to order 46 pounds (lbs) of durian cream daily. The puff can be made with ingredients that are well stocked at the bakery, so there is no need to worry about that.

1) What Cycle Service Level (CSL) does the order size proposed by the chef correspond to?

2) How much does the chef value the additional cost per stock out (the penalty for not satisfying demand) per pound of durian cream?

Reference no: EM132204643

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