Mama Lulwa's Frozen Pizzas uses 50,000 units of cheese per year. Each unit costs US$2.50. The ordering

Question:

Mama Lulwa's Frozen Pizzas uses 50,000 units of cheese per year. Each unit costs US$2.50. The ordering cost for the cheese is US$250 per order, and its carrying cost is US$0.50 per unit per year. Calculate the firm's (EOQ) for the cheese. Mama Lulwa's operates 250 days per year and maintains a minimum inventory level of 2 days' worth of cheese as a safety stock. If the lead time to receive orders of cheese is 3 days, calculate the reorder point.
Economic Order Quantity
Economic order quantity (EOQ) is the ideal order quantity a company should purchase to minimize inventory costs such as holding costs, shortage costs, and order costs. This production-scheduling model was developed in 1913 by Ford W. Harris and has...