Steve's Beta House, a popular sandwich place on campus, has decided to bake its own buns.

Steve's Beta House, a popular sandwich place on

campus, has decided to bake its own buns.While

demand for the basic bun is 180 dozen per day (the

shop is open from noon to midnight, 300 days per

year, and closed on Sundays), the company is currently

buying buns every Monday and Thursday

from a bakery about 2 hours away. The driver

checks the stock of buns and leaves whatever it

takes to get stock levels to 565 dozen. Steve has

checked the invoices recently and found the average

delivery to be about 540 dozen. Steve worked

out the schedule based upon the bakery's estimated

delivery cost ($300 per trip) and Steve's estimate

for keeping buns in stock. Assume Steve can lease

an oven that could bake 36 dozen buns per hour

and have a setup cost of $36 per order. The oven

could only be operated while the shop is open but

its capacity during that time could be shared by

other products used at Steve's.

a) What is the safety stock level currently implied

by the ordering policy?

b) What is the cost of holding inventory implied

by the current ordering policy? Given the short

shelf life of baked goods, does this seem reasonable?

c) How many buns should Steve bake before

switching to something else in the oven (EPQ)?

d) What would be the time required to bake that

quantity?

e) How long would that batch of buns last before

Steve would need to set up and bake another

batch?

f) What would be the maximum inventory level

under this policy? Can you explain this given

the EPQ is greater than the current average

order size?

g) What impact would this change in maximum

inventory level have on bun freshness if any?