Economics

A company based in Illinois has invented a way to make pepperoni out of soy beans, and this pepperoni product has developed a niche market among pizzerias in Anaheim. The owner, Mr. Bean, has asked his sister to serve as a local distributor and estimates that the demand for the pepperonis is fairly steady at 2000 per year. The pepperonis cost Mr. Bean $1.85 per unit to produce, and he is willing to sell them to his sister for $2.00. Due to their composition, the pepperonis must be kept refrigerated, so Ms. Bean has made arrangements with a trucking company for refrigerated shipments at a cost of $250 for up to 1000 pepperonis. It takes one week for Ms. Bean to receive to receive an order from the factory. Ms. Bean is financing the distributorship using her credit cards, and estimates that, between the interest on her credit cards and the cost of storage, her annual holding cost rate is 40%.
(a) How many pepperonis should Ms. Bean have trucked in at one time, and how often should she order them?
(b) When should Ms. Bean call her brother to send another shipment?
(c) Suppose that the pepperonis sell for $3.00 each. Are these pepperonis a profitable item for Ms. Bean? If so, what annual profit can she expect to realize from this item? (Assume that she uses the best inventory control system for this situation.)
(d) During the winter, the truck is sometimes delayed by snow. The trucking company has provided Ms. Bean information on actual transit times that occurred last winter. From this, Ms. Bean estimates that the demand during the actual transit time would have had a mean of 50 and a standard deviation of 20. Suggest and justify a service level that is appropriate considering the economics of this situation, and find the corresponding reorder point.

Don't use plagiarized sources. Get Your Custom Essay on
Economics
Just from $13/Page
Order Essay
Place Order
Grab A 14% Discount on This Paper
Pages (550 words)
Approximate price: -
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Try it now!

Grab A 14% Discount on This Paper

Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.