EOQ

Problem #$1$: The Always Fresh Grocery Store carries a particular brand of tea that has the following

characteristics:

Sales: $8$ cases per week

Ordering cost: $$10$ per order

Carrying charge: $20\%$ annually

Item cost: $$80$ per case

A$)$ How many cases should be ordered at a time?

B$)$ At what inventory level will tea be ordered assuming safety stock is set at $12$ cases and the

lead time is $2$ weeks?

C$)$ What factors might cause the company to order a larger or smaller amount than the EOQ?

$2)$ ABC

Papa Pete$$s Pizza sell $11$ different pizza types. Ingredients used in a month and the associated cost are as

follows:

Product Qty Used $ per Qty

Dough $1200$ lbs $\mathrm{.}06$ per lb

Sauce $700$ lbs $\mathrm{.}11$ per lb

Cheese $650$ lbs $2\mathrm{.}09$ per lb

Sausage $300$ lbs $2\mathrm{.}89$ per lb

Pepperoni $1200$ oz $13\mathrm{.}23$ per $6$oz bag

Chicken $380$ lbs $\mathrm{.}89$ per lb

Pineapple $287$ cans $1\mathrm{.}99$ per can

Tomatoes $220\mathrm{.}68$ per tomato

Peppers $180\mathrm{.}50$ per pepper

Onions $250\mathrm{.}23$

Olives $215$ cans $\mathrm{.}97$ per can

Parmesan $15$ lbs $4\mathrm{.}07$ per lb

Garlic $52$ cloves $\mathrm{.}33$ per clove

A$)$ Categorize the products into A$,$ B and C categories. Does the data follow the Pareto principle?

Explain.

B$)$ Based on typical ABC analysis, which products should receive the most attention from

inventory management and why?

$3)$ There are both good and poor reasons to carry inventory. Name and describe at least $2$ of

each.