Kuh’s is a leading Canadian ice cream chain. They have a huge fan base of 10,000 customers for their Coconut Macadamia Nut ice cream, On average, each of those customers consumes 10 liters of their Coconut Macadamia Nut ice cream per year with a standard deviation of 5 liters per year. Assume one kg of unprocessed macadamia nuts is needed to make one liter of this ice cream, The macadamia nuts (and the coconuts) are imported from Hawaii. The cost of unprocessed macadamia nuts is $10/kg. Each shipment has a fixed cost $5,225 plus $375 for custom clearance charges. The lead time for the shipments is 3 weeks. Mr. Keller, the purchasing manager of Kuh’s, estimates that the annual holding cost of unprocessed macadamia nuts is approximately 15% of the purchasing cost. Mr. Keller seeks to minimize the total annual cost, which consists of the annual shipping cost, annual holding cost, and annual purchasing cost. Assume there are 52 weeks in a year.
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