Sam\'s Cat Hotel operates 52 weeks per year, 7 days per week, and uses a continu

Question

Sam's Cat Hotel operates 52 weeks per year, 7 days per week, and uses a continuous review inventory system. It purchases kitty litter for $11.50 per bag. The following information is available about these bags. Refer to the standard normal table for z-values. Demand = 80 bags/week Order cost = $56/order Annual holding cost = 30 percent of cost Desired cycle-service level = 96 percent Lead time = 2 week(s) (14 working days) Standard deviation of weekly demand = 16 bags Current on-hand inventory is 350 bags, with no open orders or backorders. What is the EOQ? Sam's optimal order quantity is 367 bags. (Enter your response rounded to the nearest whole number.) What would be the average time between orders (in weeks)? The average time between orders is 4.6 weeks. (Enter your response rounded to one decimal place.) What should R be? The reorder point is 200 bags. (Enter your response rounded to the nearest whole number.) An inventory withdrawal of 10 bags was just made. Is it time to reorder? It is not time to reorder. The store currently uses a lot size of 505 bags (i.e., Q = 505). What is the annual holding cost of this policy? The annual holding cost is $ 871.13. (Enter your response rounded to two decimal places.) What is the annual ordering cost? The annual ordering cost is $. (Enter your response rounded to two decimal places.)

Explanation / Answer

Annual Ordering Cost = Annual Demand / Order Size * Order Cost per order At EOQ, Annual ordering Cost = (80*52) / 367 * $30 per order = 11.34 orders * $30 per order = $340.05 At Order Qty = 505, Annual ordering Cost = (80*52) / 505 * $30 per order = 8.24 orders * $30 per order = $247.13

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