Mathilda’s Bakery & Cakes is a local chain offering breads, rolls, and cakes in
ID: 389576 • Letter: M
Question
Mathilda’s Bakery & Cakes is a local chain offering breads, rolls, and cakes in Germany. The owner, Mathilda, is working on her expansion plans. Marie, is the second in command at Mathilda’s Bakery & Cakes and she is in charge of all operations related activities.
Mathilda’s Bakery & Cakes follows a traditional production concept. They bake breads and rolls early in the morning to fill the daily demand at a store. If they make too few breads or rolls they run the risk of not satisfying all customers that come in and loose the margin; if they make too many breads or rolls they may have left over products which they have to throw away. Discarding left over products incurs an additional disposal fee.
Mathilda and Marie are evaluating two products.
Calculate the optimal cycle service level for King Rolls, critical ratio.
Optimal cycle service level for king rolls:
King Rolls Whole Wheat Bread Selling price (Euro per unit) 0.22 4.75 Production cost (Euro per unit) 0.022 0.95 Disposal cost (Euro per unit) 0.01 0.03Explanation / Answer
Based on data provided :
Underage cost = Cu = Selling price/ unit – Production cost / unit = 0.22 – 0.022 = Euro 0.198 / unit
Overage cost = Co = Production cost / unit – Disposal cost / unit = 0.022 – 0.01 = Euro 0.012 / unit
Therefore ,Critical ratio
= Cu / Cu + Co
= 0.198 / ( 0.198 + 0.012)
= 0.198 /0.21
= 0.9428
Critical ratio is the probability of optimum cycle service level
Therefore probability of optimum cycle service level = 0.9428
Corresponding z value for probability 0.9428
= NORMSINV ( 0.9428 )
= 1.578
Therefore ,
Optimum service level = 0.9428 ( corresponding Z value = 1.578 )