Consider again the kitty litter ordering policy for Sam's Pet Hotel in Problem 13.

a. Suppose that the weekly demand forecast of 90 bags is incorrect and actual demand averages only 60 bags per week. How much higher will total costs be, owing to the distorted EOQ caused by this forecast error?

b. Suppose that actual demand is 60 bags but that ordering costs are cut to only $6 by using the Internet to automate order placing. However, the buyer does not tell anyone, and the EOQ is not adjusted to reflect this reduction in S. How much higher will total costs be, compared to what they could be if the EOQ were adjusted?

Data from problem 13

Sam's Pet Hotel operates 52 weeks per year, 6 days per week, and uses a continuous review inventory system. It purchases kitty litter for $11.70 per bag. The following information is available about these bags.

Current on-hand inventory is 320 bags, with no open orders or backorders.

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Demand 90 bags/week Order cost = $54/order Annual holding cost = 27 percent of cost Desired cycle-service level = 80 percent Lead time = 3 weeks (18 working days) Standard deviation of weekly demand = 15 bags