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Determine the optimal size of the orders of salamis

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Question - A distributor sells salamis in Silicon Valley. The salamis cost $1.85 each. The cost of tracking and receiving the orders cost $100. Holding cost is $1/unit/week. The distributor sells an average 100 salamis per week (5 days/week).

1. Determine the optimal size of the orders of salamis.

2. What is the optimal time between two successive placements of orders?

3. What is the average fixed order cost per week?

4. What is the optimal inventory cost (without variable cost)?

5. If you set Q = √2EOQ, what is the inventory-related cost (without variable cost)?

6. If you set Q = EOQ/ √2, what is the inventory-related cost?

7. What can you conclude based on (e), (f)?

8. If the minimum order quantity by the vendor is 10% higher than your EOQ, what should you do and why?

Reference no: EM133114504

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