a) A wholesale garden supply store is trying to determine how many pounds of “Mexican Beach” decorative pebbles to order. Suppose the demand for these decorative pebbles is always 250 pounds per day, the ordering cost is $20 per order and it costs $0.25 to hold one pound in inventory for one year. The lead time for orders from their supplier is always 8 days and inventory is managed with a continuous review policy. The store operates 365 days per year. Show all your work for all parts. a) Determine the economic order quantity (that is, how many pounds they should order to minimize their cost) and the corresponding total annual cost. Economic order quantity = _________ Total annual cost = __________
b) Calculate the reorder point and state when they should place an order. Reorder Point = __________ Place an order when:
c) Suppose the store orders once a month (12 times a year), rather than according to your answer to part a). How large is an order on average and what is the total annual cost? By what percentage does this increase the cost compared to using the best order size from part a? Order size = ________ Total annual cost = ________ How much more per year does this cost compared to using the best order size from part a? _________