Question

Ollah's Organic Pet Shop sells about 6,000 bags of free-range dog biscuits every year. The fixed ordering cost is $26, and the cost of holding a bag in inventory for a year is $5.00 Click the icon to view the table of z values. a. What is the economic order quantity for the biscuits? The EOQ is(Enter your response rounded to the nearest whole number) b. Suppose Ollah decides to order 360 bags at a time. What would the total ordering and holding costs for the year be? (For this problem, don't consider safety stock when calculating holding costs.) The total ordering and holding costs are s(Enter your response rounded to the nearest dollar) Reference z value 0.84 1.28 1.65 2.33 3.08 Associated service level 80% 90% 95% 99% 99 9% Done

Answer 1

Economic Order Quantity refers to the number of unit the company should add to the inventory and the order is made to minimize the total inventory cost. It maintain a balance between ordering costs and carrying costs. EOQ act as a review inventory system to monitor the inventory level continuously and once the level reaches the reorder point, a fixed quantity of order is placed. Thus EOQ helps in calculating reorder point and optimal reorder quantity to avoid shortage of inventory.

6000 b = 12x 6000 X 26 249:19 Au | 250 2 6000 ,126) , r 360 x 5 360 2 43333 + 900 13 3 3 33 3 1333 se