Scenario 9.9
"Gollee those cats sure go through a lot of food," Geoff exclaimed as he saw the shopping list pad that had been pre-printed with the words "cat food" at the top. He pondered a different approach to shopping for the furry little darlings, reviewed his shopping records, and discovered the following. The price of cat food has held steady at 89 cents per can. Despite feigning indifference, each of the seven cats nibbles their way through an average of one can per day, three hundred sixty five days a year. The price of gasoline has held constant at $3.50 per gallon and his pickup uses a gallon each way to the cat food store. The cost to hold a can of cat food is 10% of the unit price.
-Use the information in Scenario 9.9 to determine the average pantry space occupied by cat food if each can takes up 13 cubic inches and Geoff obeys an EOQ policy for managing the cat food purchase process.
A) 2.4 cubic feet
B) 24 cubic feet
C) 4.8 cubic feet
D) 12 cubic feet

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) model is used to minimize the total holding and ordering costs for yearly inventory. The formula for EOQ is $\sqrt{\frac{2DS}{H}}$, where D is the demand, S is the ordering cost, and H is the holding cost per unit per year. In this scenario, D = 7 cats * 365 days = 2555 cans per year, S = 2 trips * $3.50 per gallon = $7.00, and H = 10% of 89 cents = $0.089 per can. Plugging these values into the EOQ formula gives an order quantity that, when calculated, results in a certain number of cans per order. The average inventory level is half the EOQ, and multiplying this by the volume per can (13 cubic inches) and converting to cubic feet (1 cubic foot = 1728 cubic inches) gives the average pantry space occupied by cat food. The correct calculation leads to the answer that fits the scenario described.

Scenario 9.9 "Gollee Those Cats Sure Go Through a Lot of Food