Pizza delivery boxes from printing supplier

Reference no: EM132096588

Mama’s Pizza purchases its pizza delivery boxes from a printing supplier. Mama’s delivers on-average 225 pizzas each month (assume deterministic demand). Boxes cost 23 cents each, and each order costs $12.50 to process. Because of limited storage space, the manager wants to charge inventory holding at 25 percent of the cost. The lead time is 7 days, and the restaurant is open 360 days per year, assuming 30 days per month. Determine the economic order quantity, reorder point assuming no safety stock, number of orders per year, and total annual cost. Note the problem says 360 days per year so most students try to work the problem out in days. Use Excel to show your work.

1-Place a new order for 1084 boxes when the inventory position drops to or past the reorder point of 52.5 boxes.

2-Number orders/year = Annual Demand/EOQ (this is an average over many order cycles; one year it might be 2 orders, then 3 orders, etc.) Using Equation 12.6, total annual cost is ½(QCh) + (D/Q)Co.

Reference no: EM132096588

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