(15 points) whole Nature Foods sells a gluten-free cereal for which the annual d
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Question
(15 points) whole Nature Foods sells a gluten-free cereal for which the annual demand is 5,000 boxes. At the moment, it is paying $6.40 for each box; carrying cost is $1.6 per unit per year and ordering costs are $25. 1.) What is the optimum quantity they should order from their supplier? 0 1 2(sooo) 25 - 25000 e - 156250 315 28) 1. 1. le. 2.) How many orders do they place per year? D - 5p00-12.45 Q 15-20 y level? 3 394 -17% 3.) What is the average inventory level? 5000 = 101.25 S000 HO 4.) What is the total holding and order cost for the year? TU 3 500 (LS)+ L / 5.29 0.4 = 0 52.40 315.28 5.) Assuming they are open 250 days per year and the supplier lead time is 5 days, at what inventory level should they order more product (ROP). Assume demand and lead time are constant - 3 5uU0 250 X 5 = | 0 0Explanation / Answer
2) Annual demand(D) = 5000 boxes
Ordering cost (S )= $25
Carrying cost (H) = $1.6
1)Optimal order quantity (Q) = sqrt of (2DS / H)
= sqrt of [(2 x 5000 x 25)/1.6]
= sqrt of 156250
= 395.28 boxes
2) Number of orders per year = D/Q = 5000/395.28 = 12.65
3) Average inventory level = Q/2 = 395.28/2 = 197.64 boxes
4)Annual Ordering cost = (D/Q)S = (5000/395.28)25 = $316.23
Annual holding cost = (Q/2) H = (395.28/2)1.6 = $316.22
Total cost = $316.23+$316.22 = $632.45
5) If number of days per year = 250 and lead time (L) = 5 days
Reorder point = (D/250) x L
= (5000/250) x 5
= 20x5
= 100
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