Brenda opened a pool and spa store in a lively shopping mall and finds business to be booming but she often stocks out of key items customers want. She decides to experiment with inventory control methods, such as using a continuous review (fixed-order quantity) and/or periodic review (fixed-order period)

system. The 28-ounce bottle of Super Algaecide (SA)

is a high margin SKU, but it stocks out frequently.

Ten SA bottles come in each box, and she orders boxes from a vendor 160 miles away. Brenda is busy running the store and seldom has time to review store inventory status and order the right quantity at the right time. She collected the following data:

a. What is the economic order quantity (EOQ)
rounded to the next highest number?

b. What is the reorder point for SA with safety stock?

c. What is the average number of orders per year using the EOQ?

Transcribed Image Text:

Demand = 10 boxes per week Store open 48 weeks/year Order cost = $40/order Item cost = $80/box Lead-time = 4 weeks Std. deviation in weekly demand = 6 Service level = 90 percent Inventory holding cost = 15 percent per year