A pet store that sells three different types of dog food: Premium, Silver, and S

Question

A pet store that sells three different types of dog food: Premium, Silver, and Standard. The demand and cost information for these three types of dog food are given below: Dog Food Type Demand Fixed Order Cost Per bag cost Per bag holding cost Premiunm 200 $300 $10 $3 Silver 300 $450 $7 $2 Standard 500 $200 $5 $1 a) Find the number of bags that should be ordered for each type of dog food that minimizes the total costa Assume that at least one bag should be ordered of each. Solve using Excel solver. Let's say that Ms. Love can store up to 1000 lbs of dog food and the weights of the bags for Premium, Silver, and Standard are 6,3, and 10 lbs, respectively. How do the order sizes change? Solve using excel solver b)

Explanation / Answer

a) Assuming that demand is constant and uniform. We use continuous review inventory model. Optimal order quantity is determined using EOQ model, in order to minimize the total cost (ordering cost + holding cost)

Number of Premium bags should be ordered (batch size) = (2*demand*fixed order cost/holding cost) = (2*200*300/3) = 200

Number of Silver bags should be ordered (batch size) = (2*demand*fixed order cost/holding cost) = (2*300*450/2) = 367

Number of Standard bags should be ordered (batch size) = (2*demand*fixed order cost/holding cost) = (2*500*200/1) = 447

b) Only two weights are given in the question, whereas there are three types of bags. In absence of the weight of the three bags, optimal order quantity cannot be determined.

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