Alice opens an aquarium store in a lively shopping mall and finds business to be booming but she often stocks out of key items customers want.She decides to experiment with inventory control methods such as using a fixed order quantity (FQS) and/or fixed order period (FPS) systems.The FLUVAL 303 Pump, a high margin and profitable pump, is one of her best sellers but it stocks out frequently.You collect the following date with respect to this pump's sales.
Demand = 5 units per week
Store open 50 weeks/year
Order cost = $40/order
Lead-time = 3 weeks
Item cost = $80/pump
Inventory holding cost = 15% per year
a.What is the Economic Order Quantity (EOQ) rounded to the next highest number?
b.If the current order quantity used by Alice is 20 pumps per order, how much money can she save annually by adopting an EOQ ordering policy?
c.If Alice decides to use a FPS, what is the economic fixed order interval?

Question

Alice opens an aquarium store in a lively shopping mall and finds business to be booming but she often stocks out of key items customers want.She decides to experiment with inventory control methods such as using a fixed order quantity (FQS) and/or fixed order period (FPS) systems.The FLUVAL 303 Pump, a high margin and profitable pump, is one of her best sellers but it stocks out frequently.You collect the following date with respect to this pump's sales.
Demand = 5 units per week	
Store open 50 weeks/year
Order cost = $40/order	
Lead-time = 3 weeks
Item cost = $80/pump	
Inventory holding cost = 15% per year	
a.What is the Economic Order Quantity (EOQ) rounded to the next highest number?
b.If the current order quantity used by Alice is 20 pumps per order, how much money can she save annually by adopting an EOQ ordering policy?
c.If Alice decides to use a FPS, what is the economic fixed order interval?

Quizplus · Accepted Answer

The Answer of Alice opens an aquarium store in a lively shopping mall and finds business to be booming but she often stocks out of key items customers want.She decides to experiment with inventory control methods such as using a fixed order quantity (FQS) and/or fixed order period (FPS) systems.The FLUVAL 303 Pump, a high margin and profitable pump, is one of her best sellers but it stocks out frequently.You collect the following date with respect to this pump's sales.
Demand = 5 units per week	
Store open 50 weeks/year
Order cost = $40/order	
Lead-time = 3 weeks
Item cost = $80/pump	
Inventory holding cost = 15% per year	
a.What is the Economic Order Quantity (EOQ) rounded to the next highest number?
b.If the current order quantity used by Alice is 20 pumps per order, how much money can she save annually by adopting an EOQ ordering policy?
c.If Alice decides to use a FPS, what is the economic fixed order interval?

Alice Opens an Aquarium Store in a Lively Shopping Mall