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Elvis' Cat Hotel operates 5 2 weeks per year, 6 days per week, and uses a continuous review inventory system. It purchases kitty litter for
Elvis' Cat Hotel operates weeks per year, days per week, and uses a continuous review inventory system. It purchases kitty litter for $ per bag. The following information is available about these bags.
Demand bags week
Order cost $ order
Annual holding cost percent of cost
Lead time weeks working days
a What is the EOQ? What would be the average time between orders in weeks
b The store currently uses a lot size of bags ie What is the annual holding cost? Annual ordering cost? Without calculating the EOQ, how can you conclude from these two calculations that the current lot size is too large?
c What would be the annual cost saved by shifting from the bag lot size to the EOQ?
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