Reference no: EM133327060

Emma Queen decided to open a food stand at the Bothell Friday Market at Beardslee Village. She planned to buy strawberries from her local farm and sell them at the Bothel Market on Fridays. She estimated cost of renting a truck to transport strawberries is $20.00 per week. The cost of strawberries to Emma is $0.90 per pound. Emma sold the strawberries on Friday between 10 am and 6 pm at the booth at the Farmer's Market. The booth rental is $40.00 per week. The strawberries are sold to the customers for $1.20 per pound. Strawberries not sold by 6 pm were discarded. Demand for strawberries was unpredictable, Queen estimated weekly demand before placing an order with the farmer and renting the truck to transport them. Based on demand from similar entrepreneurial ventures and interviews with potential customers, she estimated that weekly demand for the strawberries was normally distributed with a mean of 350 lbs and a standard deviation of 100 lbs.

1. How many lbs of strawberries should Queen stock? Use the simulation in the spreadsheet Farmer's Market Strawberries Problem #1 to identify the optimal stocking quantity. What is the profit at this stocking quantity? (You can find the Excel spreadsheets for the case on course Canvas page. To use the spreadsheet, enter the necessary data for the mean and standard deviation of demand and the relevant price, cost and salvage value information into cells B4, B5, F2, F3, F4, F5, and F6. Then, open Solver and hit solve to get the optimal values. The Solver is already set up to give the solution once you enter the data and hit Solve)

2. Verify that the value derived in part (a) is consistent with the optimal stocking quantity in the Newsvendor model.