Answer all a-e and ***ignore the safety stock in parts B and D on the first pic*

Question

Answer all a-e and ***ignore the safety stock in parts B and D on the first pic*** on first pic and a-f on second pic please Mama's Pizza purchases its delivery boxes from a local supplier with a lead time of one week (7 days). Boxes cost 20 cents each, and each order costs $10 to process. On average, Mama's delivers 200 pizzas each month and is open 360 days per year. Inventory holding is charged at 30% of the box cost. Determine... a. the economic order quantity (nearest whole number) b. the reorder point including safety stock (nearest whole number) c. number of orders per year (1 decimal) d. total annual cost including safety stock (nearest dollar) e. If the manager of Mama's Pizza decides to order 200 boxes each month, how much cost than ordering the optimal quantity? (nearest dollar) does this purchasing plan

Explanation / Answer

Annual demand, D = 200*12 = 2400

Ordering cost, K = $ 10

Holding cost, H = 0.2*30% = $ 0.06

Lead time, L = 7 days

Average daily demand, d = 2400/360 = 6.7

a) Economic order quantity = (2*D*K/H) = (2*2400*10/0.06) = 894

b) Reorder point = d*L = 6.7*7 = 46.7 ~ 47

c) Number of orders per year = 2400/894 = 2.7

d) Total annual cost = (D/Q)*K + (Q/2)*H = (2400/894)*10 + (894/2)*0.06 = $ 54

e) Total cost of ordering policy of 200 boxes each month = (2400/200)*10 + (200/2)*0.06 = $ 126

Cost more than optimal quantity = 126-54 = $ 72

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