Question
Brenda opened a pool and spa store in a lively shopping mall and finds business to be booming but she often stocks out of
Brenda opened a pool and spa store in a lively shopping mall and finds business to be booming but she often stocks out of key items customers want. She decides to experiment with inventory control methods, such as using a continuous review (fixed-order quantity) and/or periodic review (fixed-order period) system. Super Algaecide (SA) is a high margin SKU, but it stocks out frequently. Brenda orders boxes from a vendor 160 miles away. Brenda is busy running the store and seldom has time to review store inventory status and order the right quantity at the right time. She collected the following data: Demand 7 boxes per week Order cost $36/order = Item cost $72/box = Store open 48 weeks/year Lead-time = 2 weeks Std. deviation in weekly demand = 8 Inventory-holding cost = 25 percent per year Service level = 90 percent a. What is the economic order quantity (EOQ) rounded to the next highest number? Round to the nearest whole number. 37 boxes b. What is the reorder point for SA with safety stock? Use Appendix to determine z-value. Round z-value to two decimal places. Do not round intermediate calculations. Round your answer to one decimal place. 28.5 boxes c. What is the average number of orders per year using the EOQ? Do not round intermediate calculations. Round your answer to two decimal places. orders/year
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