Reference no: EM132699077

1. A North Food Store retail grocery store is Guelph sells 4,000 jars of honey every year. Each jar of honey costs the store $10. The inventory holding cost per unit per year is $2. The ordering cost is $8.

a) Determine the economic order quantity of the store.

b) Calculate the average inventory. Calculate the number of orders per year.

c) Given the EOQ, calculate the annual holding cost. Calculate the annual ordering cost. What is the total annual cost of managing the inventory?

d) Now consider the case in which the store's current policy is to place a replenishment order every month for 500 jars of honey.

i. Calculate the annual holding cost of the 500 jars replenishment order. Calculate the annual ordering cost of the 500 jars replenishment order.

ii. By how much would the economic order quantity reduce the annual total inventory cost relative to the 500 jars replenishment order? iii. What should the holding cost per unit per year be if the 500 jars replenishment order is to be optimal for the store?

e) Now consider the case in which the store reduces its replenishment order to 100 jars as part of its initiative to implement just-in-time (JIT) inventory management. What should the ordering cost for each order be if the 100 jars replenishment order is to be optimal for the store?