The way the company can maximize the profit. Linear programming: It is a mathematical modeling procedure where a linear function is maximized or minimized subject to certain constraints. This method is widely useful in making a quantitative analysis which is essential for making important business decisions.

Question

Sam's Pet Hotel operates 51 weeks per year, 6 days per week, and uses a continuous review inventory system. It purchases kitty litter for $13.00 per bag. The following information is available about these bags: > Demand 70 bags/week > Order cost $58.00/order > Annual holding cost 30 percent of cost > Desired cycle-service level = 80 percent >Lead time 4 weeks (24 working days) > Standard deviation of weekly demand = 15 bags > Current on-hand inventory is 320 bags, with no open orders or backorders. a. Suppose that the weekly demand forecast of 70 bags is incorrect and actual demand averages only 45 bags per week. How much higher will total costs be, owing to the distorted EOQ caused by this forecast error? The costs will be $ higher owing to the error in EOQ. (Enter your response rounded to two decimal places.)

Answer 1

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Chapter 4, Problem 78P

a)

Summary Introduction

To determine: The way the company can maximize the profit.

Linear programming:

It is a mathematical modeling procedure where a linear function is maximized or minimized subject to certain constraints. This method is widely useful in making a quantitative analysis which is essential for making important business decisions.

b)

Summary Introduction

To determine: The way the optimal solution changes as the price of gasoline varies from $65-$85 per each barrel.

Linear programming:

It is a mathematical modeling procedure where a linear function is maximized or minimized subject to certain constraints. This method is widely useful in making a quantitative analysis which is essential for making important business decisions.

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