What did I do wrong in section C. Can someone give me the solution. Part A reads

Question

What did I do wrong in section C. Can someone give me the solution.

Part A reads like this

Foods Galore buys cereal from a manufacturer for $23 per case. Annual demand for cereal is 262,500 cases, and the company believes that the demand is constant at 1,050 cases per day for each of the 250 days per year that it is open for business. Average lead time from the supplier for replenishment orders is six days, and the company believes that it is also constant. The purchasing agent at Foods Galore believes that annual inventory carrying cost is 20 percent and that it costs $42 to prepare, send, and receive an order

Foods Galore conducts an in-depth analysis of its inventory management practices and discovers several flaws in its previous approach. First, they find that by ordering 21,000 or more cases each time, they can obtain a price of $22 per case from the supplier. b-1. Calculate the total annual cost based on a product cost of $22/unit. annua 5,821,725 b-2. What order quantity should Foods Galore place? Quantity to be ordered 21,000 cases 21,000 0 cases b-3. How much will they save annually by ordering the quantity shown in Part b-2. instead of Part a-1? (Round your answer to 2 decimal places.) unt saved 522584625 c. In its analysis, Foods Galore determined that demand and lead time are not constant. In fact, demand has a standard deviation of 82 cases per day and lead time has a standard deviation of 1.8 days. Foods Galore management wants to evaluate two service level policies. One policy would incur a 5 percent risk of stockout while waiting for replenishment, the other only a 1 percent risk of stockout. What would be the cost of carrying the safety stocks for each of the two policies? (Do not round intermediate calculations. Round your final answers to 2 decimal places.) arrying Cost $ 8,378.39 24,404.50 5 percent risk of stockout 1 percent risk of stockout's/k 8

Explanation / Answer

C.

For the Mean LT = 6

And SDV for LT = 1.8

For 95%

So the lead time changes and also the Safety stock needs to added for the LT demand and variation

Option 2 Option 2 D Annual Demand 262500 Units 1050 262500 K Ordering cost 42 $ 42 h Holding cost/unit 4.6 $ 4.4 P Cost per unit 23 $ 22 Currently per month 2000 units 2000 W Working days 250 days 250 d Daily demand (D/W) 1050 1050 Q Economic lot size 2189.401348 Optimal Prod quantity 21000 Sqtr((2*Annual Demand*order cost)/Annual inventory carrying cost) (sqrt(2*KD/h) (sqrt(2*KD/h) Avg S Avg Stock (Q/2) 1094.700674 10500 1095 Avg Stock 10500 N Optimal no of orders 119.8957881 12.5 (Demand/EOQ) 120 No of Orders 13 DBO Days between order (Days/N) 2.085144141 20 2.09 Days Cycle time 20.00 TC Total cost ((KD/Q)+(hQ/2)) 10071.25 $ Total cost 46725.00 OC Ordering cost (KD/Q) 5035.62 525.00 HC Holding cost (hQ/2)) 5035.62 46200.00 PC Production cost (P*D) 6037500.00 5775000.00 TC 6047571.25 5821725.00 225846.25 Savings

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