3 pts D Question 56 GROCERY STORE PROBLEM: A local retailer of pet food faces de
ID: 435240 • Letter: 3
Question
3 pts D Question 56 GROCERY STORE PROBLEM: A local retailer of pet food faces demand for one of its items at a constant rate of 25,000 bags per year. It costs them $15 to process an order and $3 per bag per year to carry the item in stock. The stock is received three working days after an order is placed. Assume 250 working days in a year and no backordering. What is the time between orders in days when optimal quantity is ordered? ? 7.75 0.058 O cannot be calculated with given information ? 1.343Explanation / Answer
Given values:
Annual demand (D) = 25,000 bags per year
Ordering cost (Co) = $15
Carrying cost (Cc) = $3
Lead time (L) = 3 days
Number of working days = 250 days
Solution:
Optimal order quantity (Q*) is calculated as,
Q* = SQRT [(2 x D x Co) / Cc]
Putting the given values in the above formula, we get;
Q* = SQRT [(2 x 25000 x $15) / $3]
Optimal order quantity, Q* = 500 bags
Number of orders in a year is calculated as,
Number of orders = Annual demand / Q*
Number of orders = 25000 / 500
Number of orders = 50
Using number of orders and optimal order quantity, time between orders is calculated as,
Time between orders = Number of working days / Number of orders
Time between orders = 250 / 50
Time between orders = 5 days
Answer: (d) 5
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