As the owner of Fresh Fish & Seafood Shop, you can purchase fresh salmon at $20 per crate and tuna at $40 per crate each morning from the Walter Fish Market. During the day, you sell the salmon at $120 per crate and tuna at $160 per crate to local restaurants. If at the end of the day your end up with any unsold crates, you salvage each unsold salmon crate at $5 and each tuna crate at $10. You believe that the demand for salmon follows the normal distribution, with a mean of 10 crates per day and a standard deviation of 2 crates per day, and that the demand for tuna is uniformly distributed between 5 and 10 crates per day.
Determine the cost of underestimating demand for salmon, the cost of overestimating the demand for salmon, the service level and the risk of stockout for salmon. Determine the cost of underestimating demand for tuna, the cost of overestimating the demand for tuna, the service level and the risk of stockout for tuna.
Compute the safety stock for salmon. Compute the safety stock for tuna. Determine the optimal number of crates for salmon and tuna you should purchase each morning.