You are the manager of Nutty Nutella, a specialty retail store that sells delicious hazelnutspread which it grinds and blends every evening for sells the next day. Recently, you haveimplemented the newsvendor model to optimize your inventory levels and meet customerdemand effectively. Nutty Nutella produces jars at a cost of $5.00 and sells them for a price of$8.00 per jar. Left over jars at the end of the day are sold to a neighboring bakery which usesthem to bake scones with. Because the bakery is owned by the managers friend, they sellthem to the bakery for a price of $2.00 each. What is the ideal service level based on theabove information?O 23%O 44%50%O 62.5%O None of the other answers are within 1% of correct37.5%

To find the ideal service level for the newsvendor model, we need to calculate the critical ratio,…

Answered: You are the manager of Nutty Nutella, a…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Especially for wholesalers and retailers involved in the distribution channels for consumer packaged goods, inventory management is a careful balancing act between: supply and demand. controlled supply and variable demand. lower inventory levels and acceptable customer service levels. variable inventory levels and consistent customer service levels.
Sam’s Cat Hotel operates 52 weeks per year, 6 days per week, and uses a continuous review inventory system. It purchases kitty litter for $11.70 per bag. The following information is available about these bags.Demand = 90 bags/weekOrder cost = $54/orderAnnual holding cost = 27 percent of costDesired cycle@service level = 80 percentLead time = 3 weeks 118 working days2Standard deviation of weekly demand = 15 bagsCurrent on-hand inventory is 320 bags, with no open orders or backorders.a. What is the EOQ? What would be the average time between orders (in weeks)?b. What should R be?c. An inventory withdrawal of 10 bags was just made. Is it time to reorder?d. The store currently uses a lot size of 500 bags (i.e., Q = 500). What is the annual holding cost of this policy? Annual ordering cost? Without calculating the EOQ, how can you conclude from these two calculations that the current lot size is too large?e. What would be the annual cost saved by shifting from the 500-bag lot size to the…
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