Question

them back at a rebate of $1 per unit. Assume that daily demand is approximately normally distributed with μ=150 and σ=30. (a) What is your recommended daily order quantity for the coffee shop? (Round your answer to the nearest integer.)

Answer 1

To decide the recommended daily order quantity for a coffee shop with normally distributed demand, a starting point would be to order the mean demand, 150 cups per day, while a Newsvendor model could further optimize the order size based on costs of over- and underordering.

Step-by-step explanation:

To determine the recommended daily order quantity for the coffee shop, we must consider the given normal distribution of daily demand with a mean (μ) of 150 cups and a standard deviation (σ) of 30 cups.

Without any information on the service level or cost of overstocking and understocking, we could start by ordering the mean demand, which is 150 cups per day.

However, it is generally wise for the business to account for variation in demand. If more detailed cost information were available, an analysis such as a Newsvendor model could be conducted to find the optimal ordering quantity that balances the cost of underordering and overordering.