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Daily demand for tomato sauce at Biagio's Pasta restaurant is normally distributed with a mean of 120 quarts and a standard deviation of 50 quarts. Biagio purchases the sauce from a wholesaler who charges $1 per quart. The wholesaler charges a $50 delivery charge independent of order size. It takes 5 days for an order to be supplied. Biagio has a walk-in cooler big enough to hold all reasonable quantities of tomato sauce; its operating expenses may be regarded as fixed. The opportunity cost of capital to Biagio is estimated to be 20% per year. Assume 360 days/year.
a) What is the optimal order size for tomato sauce for Biagio?
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