Just before the Christmas season, Bribham of New England, Inc., has signed a large contract to…
Just before the Christmas season, Bribham of New England, Inc., has signed a large contract to buy four varieties of Swiss chocolate from a local importer. As it was already late, the distributor could arrange for only a limited transportation of 20 tons of Swiss chocolate to be delivered in time for Christmas.
Chocolate is transported in containers; the weight and the transportation cost per container are given in Table.
A marketing consulting firm has conducted a study and has estimated the demand for the upcoming holiday season as a Poisson distribution with parameter λn(n = 1, 2, 3, 4 indicates the variety of the chocolate). Bribham loses contribution (i.e., shortage cost) for each container that can be sold (i.e., is demanded) but is not available.
How many containers of each variety should the company make available for Christmas in order to minimize total expected cost (transportation and shortage costs)?