Charlie\'s Pizza orders all of its pepperoni, olives, anchovies, and mozzarella
ID: 463861 • Letter: C
Question
Charlie's Pizza orders all of its pepperoni, olives, anchovies, and mozzarella cheese to be shipped directly from Italy. An American distributor stops by every eight weeks to take orders. Because the orders are shipped directly from Italy, they take seven weeks to arrive. Charlie's Pizza uses an average of 150 pounds of pepperoni each week, with a standard deviation of 14 pounds. Charlie's prides itself on offering only the best-quality ingredients and a high level of service, so it wants to ensure a 90 percent probability of not stocking out on pepperoni. Assume that the sales representative just walked in the door and there are currently 450 pounds of pepperoni in the walk-in cooler. How many pounds of pepperoni would you order? (Use Excel's NORMSINV() function to find the correct critical value for the given -level. Do not round intermediate calculations. Round "z" value to 2 decimal places and final answer to the nearest whole number.)
Explanation / Answer
Average demand= 150 pounds/week
Fixed time between orders =8 weeks
lead time =5 weeks
standard deviation of demand = 14 pounds
Inventory in stock = 450 pounds
z for 90% probability= 1.29
Pounds of pepporni to order = 150*(8+7) + 1.29 * 14* sqrt((8+7))-450
= 1870 pounds
On using Excel NORMSINV function critical value is 1869.946 for alpha = 0.1