Problem $7-6($Algo$)$

Foods Galore is a major distributor to restaurants and other institutional food users.

Foods Galore buys cereal from a manufacturer for $$22$ per case. Annual demand for cereal is $212,500$

cases, and the company believes that the demand is constant at $850$ cases per day for each of the $250$

days per year that it is open for business. Average lead time from the supplier for replenishment orders

Is seven days, and the company believes that it is also constant. The purchasing agent at Foods Galore

believes that annual Inventory carrying cost is $25$ percent and that it costs $$48$ to prepare, send, and

recelve an order. Use Table $7-2.$

a$-1.$ How many cases of cereal should Foods Galore order each time it places an order? $($Round your

answer to the nearest whole number.$)$

Economic order quantity

$1,926$ cases

a$-2.$ What will be the average inventory? $($Round your answer to $1$ declmal place.$)$

Average inventory

$963\mathrm{.}0$ cases

a$-3.$ What will be the Inventory turnover rate? $($Round your answer to $1$ decimal place.$)$

Inventory turnover

$220\mathrm{.}7$ times per year

a$-4.$ Calculate the total annual cost based on a product cost of $$\frac{22}{?}$ unit. $($Do not round Intermedlate

calculations. Round your answer to $2$ decimal places.$)$a$-4.$ Calculate the total annual cost based on a product cost of $$\frac{22}{?}$ unit. $($Do not round Intermedlate

calculations. Round your answer to $2$ decimal places.$)$

Total annual cost

Foods Galore conducts an In$-$depth analysis of Its inventory management practices and discovers

several flaws in its previous approach. First, they find that by ordering $12,000$ or more cases each time,

they can obtain a price of $$19$ per case from the supplier.

b$-1.$ Calculate the total annual cost based on a product cost of $$\frac{19}{?}$ unit.

Total annual cost

$$4,083,162$

b$-2.$ What order quantity should Foods Galore place?

Quantity to be ordered

$19,000$ cases

b$-3.$ How much will they save annually by ordering the quantity shown in Part b$-2$ instead of Part a$-1?$

$($Round your answer to $2$ decimal places.$)$

Amount saved

$$,602,430\mathrm{.}61$c$.$ In Its analysis, Foods Galore determined that demand and lead time are not constant. In fact, demand

has a standard deviation of $62$ cases per day and lead time has a standard devlation of $1\mathrm{.}7$ days. Foods

Galore management wants to evaluate two service level policles. One policy would Incur a $5$ percent

risk of stockout while walting for replenishment, the other only a $1$ percent risk of stockout. What would

be the cost of carrying the safety stocks for each of the two policles? $($Do not round Intermedlate

calculations. Round your final answers to $2$ decimal places.$)$