Sam\'s Cat Hotel operates 50 weeks per year, 7 days per week. It purchases kitty

Question

Sam's Cat Hotel operates 50 weeks per year, 7 days per week. It purchases kitty litter for $7.50 per bag. The following information is available about these bags: Demand-70 bags/week >Order cost- $65/order Annual holding cost 28 percent of cost Desired cycle-service level = 92 percent Lead time 2 week(s) (14 working days) Standard deviation of weekly demand = 5 bags Current on-hand inventory is 200 bags, with no open orders or backorders. Suppose that Sam's Cat Hotel uses a P system. The average daily demand, d, is 10 bags (70/7), and the standard deviation of daily demand, , is 1.890 bags. Refer to the standard normal table for z-values. Standard Deviation of Weekly Demand vDays per Week a. What P (in working days) and T should be used to approximate the cost trade-offs of the EOQ? The time between orders, P should be days. Enter your response rounded to the nearest whole number)

Explanation / Answer

D = Annual demand = 70 x 50 = 3500
S = Ordering cost = $65
C = Purchase cost = $7.50 per item
H = Holding cost per item per year = 28% x $7.50 = $2.10
L = Average lead time = 14 days
d = Average daily demand = 10 bags

EOQ = (2.D.S/H)1/2 = sqrt(2*3500*65/2.1) = 465.47

P = Time between orders = EOQ / d = 465.47 / 10 = 46.547 or 47 days

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