Godfather Pizza is a popular pizza restaurant near a university campus.This pizza shop is very popular as the price is reasonable, and the quality of the pizza is excellent. It has broad range of varieties, which students can choose the type of dough and topping. The everyday sales activity is high, which keep this pizza shop busy. However, Greg Taylor, the accountantnoticed that there is a small profit compares to the sales. Greg starts analyzing the efficiency of the business, particularly inventory practices. He noticed that the owner had more than 60 items regularly carried in inventory. Of these items, the most expensive to buy and carry was cheese. Cheese was ordered in blocks at $32.50 per block. Annual usage totals 15 500 blocks.

Upon questioning the owner, Greg found that there are problems in managing the cheese. The size of the order was usually 300 blocks. The cost of carrying one block of cheese is 15% of its purchase price. It took 5 ten days to receive a new order when placed, which was done whenever the inventory of cheese dropped to 300 blocks. It costs $70 to place and receive an order.

Godfather Pizza stays open six days a week and operates 51 weeks a year. It closes during Christmas day and New Year.

Requirements:

1. Calculate the total ordering and carrying cost under the current policy Support your answer with calculation.(1 mark)
2. If Greg tries to use EOQ formula, how much the company will save inventory cost per year? Support your answer with calculation. (2 marks)
3. If the company uses EOQ formulas, when the company should put the order? Support your answer with calculation (1 mark)
4. Suppose the warehouse only has space to carry 500 blocks of cheese and to keep the cheese fresh, it must not be kept for more than 10 days.Please advise whether EOQ is a better policy than the current one? Support your answer with calculation (2 marks)
5. Suppose Greg likes to introduce a contemporary inventory policy such as Just In Time. Show the best steps Greg must take to implement the new policy? Explain what are the obstacles that he may have during the transition period and how to manage the obstacles? Please show the calculation whether this new policy will give more advantages compare to the current or EOQ policies (4 marks)