A grocery store sells 250 bags of rice each week. This number has been steady. Each...

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A grocery store sells 250 bags of rice each week. This number has been steady. Each bag of rice costs $2 and the store purchases the bags of rice from a nearby supplier which leads to negligible lead time. The administrative and truck delivery costs add up to $25 per order placed. The store's finance manager calculated the annualized WACC (weighted average cost of capital) for the store as 25%. The store works for 52 weeks a year. a) If the store wants to minimize its inventory costs, how many bags of rice should the store order every time it places an order? b) How many orders should the store place in a year, i.e., frequency of orders? c) What is the total setup costs per year? d) How many bags does the store carry on the average, i.e., average inventory? e) What is the total holding costs per year? f) What is the total annual cost of managing the rice inventory in this store? Problem 2. (s,Q) Inventory Model LAtailer sells umbrellas and experiences demand that follows a normal distribution with a weekly mean of 100 umbrellas and a weekly standard deviation of 20 umbrellas. The cost of each umbrella is $15 and the annualized WACC (weighted average cost of capital) for LAtailer is 20%. Once an order is issued, it is delivered in 5 days. LAtailer works for 50 weeks a year. LAtailer uses (s,Q) model to manage its umbrella inventory and determines the order quantity for each order placed according to EOQ. a) How many umbrellas should LAtailer order every time it places an order? b) If LAtailer would like to be in stock 95% of all reorder periods, what would be the inventory level that LAtailer should issue an order? c) Based on your result in part b, what is the level of pipeline inventory? d) Based on your result in part b, what is the level of safety stock? e) What is the total annual cost per year in managing this umbrella inventory? A grocery store sells 250 bags of rice each week. This number has been steady. Each bag of rice costs $2 and the store purchases the bags of rice from a nearby supplier which leads to negligible lead time. The administrative and truck delivery costs add up to $25 per order placed. The store's finance manager calculated the annualized WACC (weighted average cost of capital) for the store as 25%. The store works for 52 weeks a year. a) If the store wants to minimize its inventory costs, how many bags of rice should the store order every time it places an order? b) How many orders should the store place in a year, i.e., frequency of orders? c) What is the total setup costs per year? d) How many bags does the store carry on the average, i.e., average inventory? e) What is the total holding costs per year? f) What is the total annual cost of managing the rice inventory in this store? Problem 2. (s,Q) Inventory Model LAtailer sells umbrellas and experiences demand that follows a normal distribution with a weekly mean of 100 umbrellas and a weekly standard deviation of 20 umbrellas. The cost of each umbrella is $15 and the annualized WACC (weighted average cost of capital) for LAtailer is 20%. Once an order is issued, it is delivered in 5 days. LAtailer works for 50 weeks a year. LAtailer uses (s,Q) model to manage its umbrella inventory and determines the order quantity for each order placed according to EOQ. a) How many umbrellas should LAtailer order every time it places an order? b) If LAtailer would like to be in stock 95% of all reorder periods, what would be the inventory level that LAtailer should issue an order? c) Based on your result in part b, what is the level of pipeline inventory? d) Based on your result in part b, what is the level of safety stock? e) What is the total annual cost per year in managing this umbrella inventory?

Answer rating: 100% (QA)

a To minimize inventory costs the Economic Order Quantity EOQ should be calculated for the grocery store The EOQ formula is EOQ sqrt2DSH Where D Annual demand number of bags per year 250 bagsweek 52 w... View the full answer