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Question 1: 10 points Fantastic Eggoland Diner (FED) uses eggs at a constant rate of 200 doz. per day. Currently, they purchase the eggs
Question 1: 10 points Fantastic Eggoland Diner (FED) uses eggs at a constant rate of 200 doz. per day. Currently, they purchase the eggs from a distributor that charges a fixed fee (irrespective of the order size) of 1250 dollars per order. The purchase price from the distributor is $8 per doz. Suppose the annual inventory holding cost for FED is 40% of the unit price/doz. 1. What is the order quantity that FED should use in order to minimize their setup and holding costs Assume 250 days per year. 2. What is the total annual cost of following this policy? 3. To makes its ordering pattern more streamlined, FED wants its orders to be a multiple of 2000 doz. Under this requirement, what should their order quantity be? What is the additional cost of using this policy? Question 2: 10 points Consider FED's problem that is described in the previous problem. To meet with state audit requirement, FED now has to ensure that it does not hold eggs for more than 20 days. 1. Does the current policy satisfy this requirement? What batch size should they use in order to meet this requirement? Explain. 2. Under this new policy, what is the inventory turns realized by FED? 3. What is the resulting change in cost?
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