Question: 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 percent per year Item cost = $80 per case
a. How many cases should be ordered at a time?
b. How often will tea be ordered?
c. What is the annual cost of ordering and carrying tea?
d. What factors might cause the firm to order a larger or smaller amount than the EOQ?
2. The Grinell Machine Shop makes a line of metal tables. Some of these tables are carried in finished goods inventory. A particular table has the following characteristics: Sales = 300 per year Setup cost = $1200 per setup (this includes machine setup for all the different parts in the table) Carrying cost = 20 percent per year Item cost = $25
a. How many of these tables should be made in a production lot?
b. How often will production be scheduled?
c. What factors might cause the firm to schedule a lot size different from the one you have computed?