Chadwick inc sells shoes. chadwick uses an EOQ model to determine the number of pairs of shoes to order. Annual demand is approximately 100, pairs of shoes. The the ordering cost is $160 per order. The annual carrying cost of a pair of shoes is $2.00 per pair.

Chadwick operates on 50-week per year basis. Lead time for each order is 1.5 weeks. However, if chadwick runs out of stock due to higher than average demand, it can “rush order” them to the store at an additional cost of $1 per pair. Demand for lead time period may vary with the following probability distribution.

Demand during lead time Probability (sums to 1.00)

2,500 pairs 0.20

3,000 pairs 0.60

3,500 pairs 0.15

4,000 pairs 0.05

What is the reorder point without safety stock?

What is the total relevant cost (stockout cost + carrying cost) if not safety stock is carried?

What is the total relevant cost (stockout cost + carrying cost) if 1,000 pairs of safety stock is carried?

How many orders per year does chadwick have to place following the EOQ model?

What are the saving in total relevant cost (stockout cost + carrying cost) is 500 pairs of safety stock is carried instead of no safety stock?

Answer rating: 100% (QA)

Annual ConoumpHon 100 Pair 160 Anst deing Cost Curning Co st 20... View the full answer