Deep Six Seafood, a restaurant that’s open 360 days a year, specializes in fresh
ID: 422755 • Letter: D
Question
Deep Six Seafood, a restaurant that’s open 360 days a year, specializes in fresh Maine lobsters at a cost of $12.50 each. Air freight charges have increased significantly and it now costs Deep Six $50 to place an order. Because the lobsters are shipped live in a saltwater tub, the ordering cost is not affected by order sizes. The cost to keep a lobster alive until needed runs about $0.02 per day. The demand for lobsters during the 1-day lead time is as follows:
Lead-time Demand:
Probability:
0
.10
1
.30
2
.25
3
.20
4
.05
5
.10
Deep Six would like to reconsider its order size. What would you recommend as an EOQ?
35
40
69
245
None of the above.
E is not the right answer
Using the information in the previous problem, if Deep Six insists on maintaining a safety stock of 2 lobsters, at what reorder point should Deep Six place another order?
5
12
14
35
40
A is not the righty answer
Lead-time Demand:
Probability:
0
.10
1
.30
2
.25
3
.20
4
.05
5
.10
Explanation / Answer
The economic order quantity is ((2*Fixed cost*Total units Demand)/carrying cost)1/2
so the EOQ for first will be (2*4*50/0.02)1/2 the answer will be 40
We have to first find the minimum quantity demanded that will be got by getting the total investment divided by price per lobster.