for the cheese. How much should the sandwich bar order and roughly how often will they be placing an order on the distributor for this product?(2 (b) Calculate the reorder level the sandwich bar should use to ensure an in-stock frequency of 99%.
for the cheese. How much should the sandwich bar order and roughly how often will they be placing an order on the distributor for this product?(2 (b) Calculate the reorder level the sandwich bar should use to ensure an in-stock frequency of 99%.
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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![A sandwich bar orders its ingredients from
a food distributor for use in its city centre
operations which are open 7 days a week.
The ingredients include cheese which is
used across a range of sandwiches and
demand is on average 3.8 kg per day with a
daily standard deviation of 2.2kg. The
cheese is delivered in packs of 2kg and the
cheese costs €7.50 per kg. The sandwich
bar estimates that it costs €6.50 to raise and
process a purchase order when all
management time and delivery charges are
taken into account. The current distributor
delivers with an average lead time of 3 days
and a standard deviation on that lead time
of 1.4 days. Annual holding costs for stock
in the sandwich bar is estimated to be 22%
of the cost of the material stored as space is
limited.
(a) Calculate the Economic Order Quantity
for the cheese. How much should the
sandwich bar order and roughly how often
will they be placing an order on the
distributor for this product?(2
(b) Calculate the reorder level the sandwich
bar should use to ensure an in-stock
frequency of 99%.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1843953b-2fc9-49cf-912a-1835b09c8e45%2F06edabf5-484a-4146-8cb2-3dfe422e9284%2Fe3hc6he_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A sandwich bar orders its ingredients from
a food distributor for use in its city centre
operations which are open 7 days a week.
The ingredients include cheese which is
used across a range of sandwiches and
demand is on average 3.8 kg per day with a
daily standard deviation of 2.2kg. The
cheese is delivered in packs of 2kg and the
cheese costs €7.50 per kg. The sandwich
bar estimates that it costs €6.50 to raise and
process a purchase order when all
management time and delivery charges are
taken into account. The current distributor
delivers with an average lead time of 3 days
and a standard deviation on that lead time
of 1.4 days. Annual holding costs for stock
in the sandwich bar is estimated to be 22%
of the cost of the material stored as space is
limited.
(a) Calculate the Economic Order Quantity
for the cheese. How much should the
sandwich bar order and roughly how often
will they be placing an order on the
distributor for this product?(2
(b) Calculate the reorder level the sandwich
bar should use to ensure an in-stock
frequency of 99%.
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