Problem $7-6($Algo$)$

Foods Galore is a major distributor to restaurants and other institutional food users.

Foods Galore buys cereal from a manufacturer for $$24$ per case. Annual demand for cereal is $227,500$ cases, and the company belleves that the demand is constant at $910$ cases per day for each of the $250$ days per year that it is open for business. Average lead time from the suppller for replenishment orders is nine days, and the company belleves that it is also constant. The purchasing agent at Foods Galore belleves that annual inventory carrying cost is $25$ percent and that it costs $$72$ to prepare, send, and recelve an order.

a$-1.$ How many cases of cereal should Foods Galore order each time it places an order?

a$-2.$ What will be the average inventory?

a$-3.$ What will be the Inventory turnover rate?

a$-4.$ Calculate the total annual cost based on a product cost of $$24$ per unit.

Foods Galore conducts an In$-$depth analysis of its inventory management practices and discovers several flaws in its previous approach. First, it flnds that by ordering $18,000$ or more cases each time, it can obtain a price of $$22$ per case from the supplier.

b$-1.$ Calculate the total annual cost based on a product cost of $$22$ per unit.

b$-2.$ What order quantity should Foods Galore place?

b$-3.$ How much will it save annually by ordering the quantity shown in Part $b-2$ instead of Part a$-1?$

c$.$ In its analysis, Foods Galore determined that demand ${?}_d^{**}$ lead time are not constant. In fact, demand has a standard deviation of $68$ cases per day and lead time has a standard devlation of $1\mathrm{.}5$ days. Foods Galore management wants to evaluate two service level policles. One policy would incur a $5$ percent risk of stockout while waiting for replenishment, and the other pollcy would Incur only af percent risk of stockout. What. would be the cost of carrying the safety stocks for each of the two policies?

Required A$4$

Required B$1$

Calculate the total annual cost based on a product cost of $$\frac{22}{?}$ unit.

Total annual cost