Ann Chovies, owner of the Perfect Pasta Pizza Parlor, uses 20 pounds of pepperoni each day in preparing pizzas. Order costs for pepperoni are $10.00 per order, and carrying costs are 4 cents per pound per day. Lead time for each order is three 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 average inventory level?

Question

Quizplus · Accepted Answer

The average inventory level when ordering 80 pounds at a time is calculated by taking half of the order quantity, which is 80 pounds / 2 = 40 pounds. This accounts for the cycle of depleting the inventory from the full order quantity down to zero before the next order arrives.

Ann Chovies, Owner of the Perfect Pasta Pizza Parlor, Uses