A grocery store needs to sell 3,000 cartons of 2L 2% milk per month. The sales i
ID: 2790803 • Letter: A
Question
A grocery store needs to sell 3,000 cartons of 2L 2% milk per month. The sales is relatively constant throughout the month. The owner of this grocery store purchases milk from a supplier 50 miles away for $2 per carton, and it takes a day to restock. The holding cost per carton per month is $1.5, and the ordering cost per order is about $18.5 including labor, gas and depreciation. Consider a month of 30 days.
Part 1) The optimal order quantity is about ______________ cartons of milk, and the average inventory is about __________ cartons. (Please round to the closest integer and include no units.)
Part 2) Given the optimal order quantity calculated above, if the average inventory is 136 cartons, then the monthly holding cost is ___________ dollars, and the total cost including the cost of supply or the total unit cost for all units, holding and ordering is _____________ dollars. (Please round to two decimal points and include no units.)
Part 3) The reorder point is ___________ cartons. (Please only enter an integer and include no units.)
Explanation / Answer
EOQ = SQRT(2 × Quantity × Cost Per Order / Carrying Cost Per unit per month) Part1 Part2 Qty A 3000 3000 Cost Per Order B 18.5 18.5 Carrying cost per unit per month C 1.3 1.3 Example Question 3 for EOQ EOQ=SQRT(2X(3000)*18.5/1.3) D 292 272 (optimal order Amount Average Inventory=292/2 D/2 146 136 Month Carrying Cost E=A*C 3,900 3,900 No fo orders F=A/C 10 11 Total MOnth cost of the order G=F*B 190 204 Cost $2 per carton 6,000 6,000 Total Month cost H=E+G 10,090 10,104 Part 3) Reorder point is 98 units i.e 292/3
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