Sam's Cat Hotel operates 52 weeks per year, 7 days per week, and uses a continuous...

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Sam's Cat Hotel operates 52 weeks per year, 7 days per week, and uses a continuous...

Sam's Cat Hotel operates 52 weeks per year, 7 days per week, and uses a continuous review inventory system. It purchases kitty litter for $12.00 per bag. The following information is available about these bags. Refer to the standard normal table for z-values. follows

≻Demand = 80 bags/week follows

≻Order cost = $ 55/order follows

≻Annual holding cost = 29 percent of cost follows

≻Desired cycle-service level equals = 96 percent follows

≻Lead time = 4 week(s) (28 working days) follows

≻Standard deviation of weekly demand =20 bags follows

≻Current on-hand inventory is 300 bags, with no open orders or backorders.

a. What is the EOQ? Sam's optimal order quantity is ____ bags.

business Operations-Management

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Answer 1

Answer #1

Weekly demand = 80 bags

Number of weeks per year = 52

Annual demand (D) = weekly demand × number of weeks per year = 80 × 52 = 4160 bags

Ordering cost(S) = $55 per order

Holding cost (H) = 29% of cost = 29% of $12 = $3.48

a) Economic order quantity = √(2DS/H)

= √[(2 × 4160 × 55)/3.48]

= √(457600/3.48)

= √131494.2528

= 362.62 or rounded off to 363 bags

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Answer 2

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