The local supermarket buys lettuce each day to ensure really fresh produce. Each morning, any lettuce that is left from the previous day is sold to a dealer that resells it to farmers who use it to feed their animals. This week, the supermarket can buy fresh lettuce for $6.00 a box. The lettuce is sold for $18.00 a box and the dealer that sells old lettuce is willing to pay $3.60 a box. Past history says that tomorrow's demand for lettuce averages 254 boxes with a standard deviation of 37 boxes. How many boxes of lettuce should the supermarket purchase tomorrow

The appropriate answer will be "289 boxes".

Explanation:

The given values are:

Cost

= $6

Sales price

= $18

Salvage price

= $3.60

Average daily demand (d)

= 254 boxes

Standard deviation ()

= 37 boxes

Now,

Overage of cost will be:

⇒  

          ($)

Underage of cost will be:

⇒  

          ($)

⇒  Service Level =

On substituting the given values in the above formula, we get

                            =

                            =

The service level value of Z at 83% is = 0.954

⇒  Order quantity =

                               =

                               =

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