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 orderABC

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

follows:

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?

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

each.

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?