Economic Order Quantity (EOQ): Economic order quantity is the quantity of order that is purchased from supplier at a time, the EOQ aim is to reduce the carrying and ordering cost of inventory. EOQ is also referred as the optimum level of lot size. Safety Stock: Safety stock is that type of stock which a company always store to meet the uncertainties seen in the future. The company always maintains this type of stock so that the demand of customer will be fulfilled and company will retain the customer. To calculate: The optimum number of pair of shoes per order using EOQ model.

Question

Chadwick Shoe Co. produces and sells an e xcellent-quality walking shoe. After production, the shoes are distributed to 20 warehouses around the country. Each warehouse services approximately 100 stores in its region. Chadwick uses an EOQ model to determine the number of pairs of shoes to order for each warehouse from the factory. Annual demand for Warehouse OR2 is approximately 120,000 pairs of shoes. The ordering cost is $250 per order. The annual carrying cost of a pair of shoes is $2.40 per pair. Q. Although OR2’s average weekly demand is 2,500 pairs of shoes (120,000 , 12 months , 4 weeks), demand each week may vary with the following probability distribution: Total demand for 1 week 2,000 pairs 2,250 pairs 2,500 pairs 2,750 pairs 3,000 pairs Probability (sums to 1.00) 0.04 0.20 0.52 0.20 0.04 If a store wants shoes and OR2 has none in…

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Question

Chapter 20, Problem 20.30P

1.

To determine

Economic Order Quantity (EOQ):

Economic order quantity is the quantity of order that is purchased from supplier at a time, the EOQ aim is to reduce the carrying and ordering cost of inventory. EOQ is also referred as the optimum level of lot size.

Safety Stock:

Safety stock is that type of stock which a company always store to meet the uncertainties seen in the future. The company always maintains this type of stock so that the demand of customer will be fulfilled and company will retain the customer.

To calculate: The optimum number of pair of shoes per order using EOQ model.

2.

To determine

To compute: The reorder point

3.

To determine

To compute: The safety stock also explains the effect of safety stock on reorder point and on reorder quantity.

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Chadwick Shoe Co. produces and sells an e xcellent-quality walking shoe. After production, the shoes are distributed to 20 warehouses around the country. Each warehouse services approximately 100 stores in its region. Chadwick uses an EOQ model to determine the number of pairs of shoes to order for each warehouse from the factory. Annual demand for Warehouse OR2 is approximately 120,000 pairs of shoes. The ordering cost is $250 per order. The annual carrying cost of a pair of shoes is $2.40 per pair. Q. Although OR2’s average weekly demand is 2,500 pairs of shoes (120,000 , 12 months , 4 weeks), demand each week may vary with the following probability distribution: Total demand for 1 week 2,000 pairs 2,250 pairs 2,500 pairs 2,750 pairs 3,000 pairs Probability (sums to 1.00) 0.04 0.20 0.52 0.20 0.04 If a store wants shoes and OR2 has none in…

Chadwick Shoe Co. produces and sells an e xcellent-quality walking shoe. After production, the shoes are distributed to 20 warehouses around the country. Each warehouse services approximately 100 stores in its region. Chadwick uses an EOQ model to determine the number of pairs of shoes to order for each warehouse from the factory. Annual demand for Warehouse OR2 is approximately 120,000 pairs of shoes. The ordering cost is $250 per order. The annual carrying cost of a pair of shoes is $2.40 per pair. Q. Assume each month consists of approximately 4 weeks. If it takes 1 week to receive an order, at what point should warehouse OR2 reorder shoes?

Chadwick Shoe Co. produces and sells an e xcellent-quality walking shoe. After production, the shoes are distributed to 20 warehouses around the country. Each warehouse services approximately 100 stores in its region. Chadwick uses an EOQ model to determine the number of pairs of shoes to order for each warehouse from the factory. Annual demand for Warehouse OR2 is approximately 120,000 pairs of shoes. The ordering cost is $250 per order. The annual carrying cost of a pair of shoes is $2.40 per pair. Q. Use the EOQ model to determine the optimal number of pairs of shoes per order