Business, 16.03.2020 00:27 drice517

A restaurant supply store is trying to determine how many boxes of a certain commonly used item to order. They estimate that that the demand for the item averages 30 boxes per week. The ordering cost is $10 per order and it costs $20 to hold one box in inventory for one year. The lead time for orders is always 1.5 weeks and inventory is managed with a continuous review policy. Show all your work for all parts.

(8 pts.) a) Determine the economic order quantity (that is, how many boxes they should order to minimize their cost) and the corresponding total annual cost.

(4 pts.) b) Calculate the reorder point and state when they should place an order.

(6 pts.) c) Suppose the store orders every two weeks (rather than your answer to part a). How large is an order on average and what is the total annual cost? How much more does this cost than using the best order size?

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