Ann Chovies,owner of the Perfect Pasta Pizza Parlour,uses 20 pounds of pepperoni each day in preparing pizzas.Order costs for pepperoni are $10.00 per order,and holding costs are 4 cents per pound per day.Lead time for each order is 3 days,and the pepperoni itself costs $3.00 per pound. If she were to order 80 pounds of pepperoni at a time,what would be the length of an order cycle?

Question

Quizplus · Accepted Answer

First, we need to calculate the economic order quantity (EOQ):
EOQ = sqrt((2 x 20 x $10.00)/($0.04 x $3.00)) = 400
This means that Ann should order 400 pounds of pepperoni each time to minimize total ordering and holding costs.

Next, we can calculate the length of an order cycle:
Demand per day = 20 pounds
Order quantity = 400 pounds
Time between orders = (Order quantity) / (Demand per day) = 400/20 = 20 days

However, since there is a lead time of 3 days, we need to add this to the time between orders:
Length of order cycle = Time between orders + Lead time = 20 + 3 = 23 days

Therefore, the best choice is D, 4 days.

Ann Chovies,owner of the Perfect Pasta Pizza Parlour,uses 20 Pounds