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Requirements

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1. Use the EOQ model to determine the optimal number of pairs of shoes per order.

2. Assume each month consists of approximately 4 weeks. If it takes 1 week to receive an order, at what point should warehouse OR2 reorder shoes?

3. Although OR2's average weekly demand is 3,125 pairs of shoes (150,000 12 months 4 weeks), demand each week may vary with the following probability distribution:

Total demand for 1 week	2,200 pairs	1,950 pairs	3,125 pairs	3,325 pairs	3,655 pairs
Probability (sums to 1.00)	0.03	0.30	0.34	0.30	0.03

If a store wants shoes and OR2 has none in stock, OR2 can "rush" them to the store at an additional cost of $2 per pair. How much safety stock should Warehouse OR2 hold? How will this affect the reorder point and reorder quantity?

Miller Shoe Co. produces and sells an excellent-quality walking shoe. After production, the shoes are distributed to 20 warehouses around the country. Each warehouse services approximately 100 stores in its region. Miller uses an EOQ model to determine the number of pairs of shoes to order for each warehouse from the factory. Annual demand for Warehouse OR2 is approximately 150,000

pairs of shoes. The ordering cost is $276 per order. The annual carrying cost of a pair of shoes is $2.30 per pair.

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Part 1

Requirement 1. Use the EOQ model to determine the optimal number of pairs of shoes per order.

Begin by selecting the formula used to calculate EOQ. (D=Demand in units for one year, P=Ordering cost per purchase order, C=Carrying cost of one unit in stock, Q=Any order quantity.)

ModifyingAbove EOQ equals StartFraction Upper D Over left parenthesis 1 plus Upper P right parenthesis Superscript Upper C EndFraction WithEOQ=D(1+P)C

ModifyingAbove EOQ equals StartRoot StartFraction 2 DP Over Upper C EndFraction EndRoot With SubscriptEOQ=2DPC

ModifyingAbove EOQ equals StartFraction DP Over Upper Q EndFraction plus StartFraction QC Over 2 EndFraction With