The famous Ernie of “Sesame Street” continually faces replenishment decisions concerning his cookie supply. The Cookie Monster devours the cookies at an average rate of 200 per day. The cookies cost $0.03 each. Ernie is getting fed up with having to go to the store once a week. His friend, Bert, has offered to do a study to help Ernie with his problem.

a. If Ernie is implicitly following an EOQ policy, what can Bert say about the implicit values of the two missing parameters?

b. Suppose that the store offered a special of 10,000 cookies for $200. Should Ernie take advantage of the offer? Discuss. (Hint: Consult your local TV listing for the timing of and channel selection for “Sesame Street.”)