llah\'s Organic Pet Shop sells about 8,250 bags of free-range dog biscuits every

Question

llah's Organic Pet Shop sells about 8,250 bags of free-range dog biscuits every year The fixed ordering cost is $20, and the cost of holding a bag in inventory for a ear is $3.00. 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 260 bags at a time. What would the total ordering and holding costs for the year be? (For this problem, don't consider safety slock when calculating holding costs) The total ordering and holding costs are $(Enter your response rounded to the nearest dollar.) c. Average weekly demand for free-range dog biscuits is 51 bags per week, with a standard deviation of 13 bags. Ollah uses a continuous inventory review system to manage inventory of the biscuits Olah wa tst set the reorderpoint high enough that there is only a 5% chance of running out before the next order comes in Assuming that the lead time is a constant 7 weeks, what should the reorder point be? The reorder point is bags. (Enter your response rounded to the nearest whole number) Enter your answer in each of the answer boxes

Explanation / Answer

Annual demand, D = 8250 bags

Ordering cost, S = $ 20

Holding cost, H = $ 3

a) EOQ = SQRT(2DS/H) = SQRT(2*8250*20/3) = 332 bags

b) Total ordering and holding costs per year = (D/Q)*S + (Q/2)*H = (8250/332)*20 + (332/2)*3 = $ 995

c) For 5% chance of stockout, z-stat = NORMSINV(1-5%) = 1.645

Average weekly demand, d = 51 bags

Std deviation of average weekly demand, s = 13 bags

Lead time, L = 7 weeks

Reorder point = Lead time demand + Safety stock

= d*L + z*s*SQRT(L)

= 51*7 + 1.645*13*SQRT(7)

= 414 bags

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