DBS Pizzas & Cafe is a fast-food restaurant based in an eastern suburb of Melbourne. They purchase
Question:
DBS Pizzas & Cafe is a fast-food restaurant based in an eastern suburb of Melbourne. They purchase their takeaway containers from a local third-party supplier. DBS Pizzas & Cafe delivers an average of six hundred takeaway orders each month (assume demand is known and certain). Containers cost a dollar and fifty cents each, and each order costs twenty dollars to process. Because of limited storage space, the café manager wants to charge inventory holding at twelve percent of the cost. The lead time is half-month, and the caf is open for business on an average three hundred days every year, assuming thirty days per month. Q1. Determine the economic order quantity (EOQ) of number of takeaway containers to order and the annual total inventory cost.
Explain in a couple of sentences the business significance of EOQ.
Q2. Determine the reorder point assuming no safety stock.
Explain in a couple of sentences the business significance of the reorder point.