Fresh and Easy sells Ellixooor, a rare fruit that is harvested only once a year. Expected demand during the forthcoming year is normal with mean 400 and s.d. 80. Fresh and Easy buys the fruit for $300 a bushel, sells it for $700 a bushel. Unsold fruits at the end of the season are sold for salvage (they use the seed to try to grow more trees) for $100 per bushel. They can only order once per year. Answer the following based on these data.
a. What is the cost of excess (in the context of single period inventory management)?
b. What is the cost of shortage (in the context of single period inventory management)?
c. What is the appropriate ratio to determine the correct number of bushels to buy?
d. What should be the number of bushels ordered by Fresh and Easy (round to nearest integer)?
e. Suppose that the s.d. of demand is 0, all other things remaining the same, how many bushels should be ordered? Explain.