A large hotel serves banquets and several restaurants from a central kitchen in which labor is shifted among various stations and jobs. Dessert consumption is virtually constant and known to be 36,000 desserts a year.
Desserts can be produced at a rate of 150 a day, and the hotel is open 360 days a year. It costs $10.00 to set up the dessert preparation station, regardless of how many deserts are then prepared. The appropriate annual holding cost of a dessert is estimated $2.00.
How much does the hotel central kitchen to produce each time that would minimize the total inventory cost? What is an average inventory?
How much does the hotel central kitchen pay in total annual holding costs on desert? How much does the hotel central kitchen pay in total annual holding costs on desert?
How often does it produce desserts under its current policy?