You have taken over as inventory manager at Dino’s Florists. You would like to use EOQ to compute the best quantity of orchids to order. The previous manager at Dino’s ordered orchids once a month in quantities of 1,000 to simply match the monthly demand. Orchids are expensive to order with an ordering cost of $300 per order. Holding cost is estimated at 15% of product cost annually, with a product cost of $60 per unit. d. What is the reorder point (ROP)? e. Above (d) assumes no safety stock. Given that the standard deviation of demand during lead time is 8 orchids, compute the amount of safety stock and the new ROP, assuming that you desire no more than 5% stockout level.
Problem 2: You have taken over as inventory manager at Dino’s Florists. You would like to use EOQ to compute the best quantity of orchids to order. The previous manager at Dino’s ordered orchids once a month in quantities of 1,000 to simply match the monthly demand. Orchids are expensive to order with an ordering cost of $300 per order. Holding cost is estimated at 15% of product cost annually, with a product cost of $60 per unit.
d. What is the reorder point (ROP)?
e. Above (d) assumes no safety stock. Given that the standard deviation of demand during lead time is 8 orchids, compute the amount of safety stock and the new ROP, assuming that you desire no more than 5% stockout level.
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