a flower shop uses 800 clay pots a month. The pots are purchased at $2 each. Ann

Question

a flower shop uses 800 clay pots a month. The pots are purchased at $2 each. Annual carrying costs are estimated at $0.60 per pot per year and ordering costs are $20 per order. The manager has been currently using an order size of 1600 flower pots per order.

A-          Other than potential cost savings, what benefit(s) would using the optimal order quantity yield?

B-         What is the maximum number of flower pots that are held in inventory in a given ordering cycle?

C-      Assume that the lead time for the pots is 1 month. What is the Reorder Point? Verbally, interpret the meaning of this Reorder Point.

Explanation / Answer

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