The WorldMart operates a chain of supermarkets. Itsbest-selling soft drink is Fruitslice. Demand (D) in April for Fruitslice at its Halifax supermarket is estimated to be 7,400 cases(24 cans in eachcase). InMarch, the Halifax supermarket estimated the ordering costs per purchase order (P) for Fruitslice to be $37. The carrying costs (C) of each case of Fruitslice in inventory for a month

were estimated to be $1.25. At the end ofMarch, the Halifax WorldMart reestimated its carrying costs to be 1.85 per case per month to take into account an increase inwarehouse-related costs.

DuringMarch, WorldMart restructured its relationship with suppliers. It reduced the number of suppliers from 690 to 270. Long-term contracts were signed only with those suppliers that agreed to make product quality checks before shipping. Each purchase order would be made by linking into thesuppliers' computer network. The Halifax WorldMart estimated that these changes would reduce the ordering costs per purchase order to $15. The WorldMart is open 30 days in April.

Requirements

1. Calculate the economic order quantity in April for Fruitslice. Use the EOQmodel, and assume in turn that

a.

D= 7,400; P= $37; C= $1.25

b.

D= 7,400; P= $37; C= 1.85

c.

D= 7,400; P= $15; C= 1.85

2. How does your answer to requirement 1 give insight into theretailer's movement toward JIT purchasingpolicies?