Reference no: EM131112115

You are responsible for managing the inventory for the trendy upscale specialty food store, Partial Foods. You are trying to set the inventory policy for one of your most popular cheeses, Mad Cow Cheddar, which comes in 1 pound wheels. It is a stable selling cheese with an average weekly demand of 14 wheels/week.

Your fixed cost of placing an order from the farm that produces Mad Cow Cheddar is $90/order and the cheese itself costs you $12.50 per wheel. Assume that there are 52 weeks in a year and that the annual inventory holding charge is 20%.

A) How many weeks on average will the Mad Cow Cheddar be on your shelf?

B) There is an opportunity cost for shelf space at Partial Foods of $10/sqft/week and each wheel of Mad Cow Cheddar occupies 0.15 sqft of space. What should your economic order quantity, in wheels, be now?

C) Your manager still thinks you order too much cheese and has limited your shelf space to a maximum of 3 square feet. There is not back room, so all of your Mad Cow Cheese wheels need to fit within that space. What should your economic order quantity, in wheels, be now?