Question

In: Operations Management

The Italian eatery at the Student Union orders pre-made, frozen calzones from a gourmet food distributor....

The Italian eatery at the Student Union orders pre-made, frozen calzones from a gourmet food distributor. They cost $2.50 apiece. Ordering costs are $10 per order, and orders always take 4 days to arrive. The demand over a term (for which the eatery is open 100 days) averages 80 calzones a day, with a standard deviation of 20 calzones per day. Holding costs are 10% of the Eatery’s purchase price.

a) What is the economic order quantity for calzones?

b) if the management has specified that the risk of a stock out during a cycle is 15.87%? What is the Reorder point?

c) What is the annual holding costs and annual ordering costs if we use the EOQ?

d) The Eatery has decided to make calzones themselves. These are made periodically in large batches, and everything not used that day is frozen. The daily production rate, p, is 160 calzones. Assume that the holding cost, H, is now $.40/calzone per term and S, the setup cost, is $16 per run. All other parameters remain unchanged. What is the EPQ, and how often do we start a production cycle? How many days do we run production? Please provide written work with formulas (not excel)

Please post written work on how you got the answer not just excel.

Solutions

Expert Solution

ANNUAL DEMAND = 8000

ORDERING COST = 10

HOLDING COST = 0.25

COST PER UNIT = 2.5

LEAD TIME = 4

EOQ = SQRT(2 * D * S / H), WHERE D = DEMAND, S = ORDERING COST AND H = HOLDING COST = SQRT(2 * 8000 * 10 / 0.25) = 800

2. SERVICE LEVEL = 1 - STOCKOUT RISK = 1 - 15.87/100 = 0.8413


DEMAND = 80

STANDARD DEVIATION OF DEMAND = 20

SERVICE LEVEL = 84.13, WHICH GIVES A Z VALUE OF 1

REORDER POINT = DEMAND * LEAD TIME + SAFETY STOCK

SAFETY STOCK = Z * STANDARD DEVIATION OF DEMAND * SQRT(LEAD TIME)

SAFETY STOCK = 1 * 20 * SQRT(4) = 40

REORDER POINT = (80 * 4) + 40 = 360

3. ANNUAL HOLDING COST = AVERAGE INVENTORY * PER UNIT HOLDING COST = (800 / 2) * 0.25 = 100

ANNUAL ORDERING COST = NUMBER OF ORDERS * ORDERING COST = (8000 / 800) * 10 = 100

COST OF MANAGING = ANNUAL HOLDING COST + ANNUAL ORDERING COST = 100 + 100 = 200

4. ANNUAL DEMAND = 8000

SETUP COST = 16

HOLDING COST = 0.4

DAILY PRODUCTION = 160

DAILY USAGE = 80

PRODUCTION EOQ = SQRT(2 * DEMAND * ORDERING COST / HOLDING COST * (1 - (DAILY USAGE / DAILY PRODUCTION))) = SQRT(2 * 8000 * 16 / (0.4 * (1 - (80 / 160))) = 1131

NUMBER OF PRODUCTION RUNS = ANNUAL DEMAND / EPQ = 8000 / 1131 = 7.07

RUN TIME = EPQ / DAILY PRODUCTION = 1131 / 160 = 7.07

** Leaving a thumbs-up would really help me out. Let me know if you face any problems.

keosha answered 1 year ago
Next > < Previous

Related Solutions

The Italian eatery at the Student Union orders pre-made, frozen calzones from a gourmet food distributor....
The Italian eatery at the Student Union orders pre-made, frozen calzones from a gourmet food distributor. They cost $2.50 apiece. Ordering costs are $10 per order, and orders always take 4 days to arrive. The demand over a term (for which the eatery is open 100 days) averages 80 calzones a day, with a standard deviation of 20 calzones per day. Holding costs are 10% of the Eatery’s purchase price. a) What is the economic order quantity for calzones? b)...
a frozen food distributor claims that 80% of its frozen chicken dinners contains three ounce of...
a frozen food distributor claims that 80% of its frozen chicken dinners contains three ounce of chicken.to check this claim,a consumer testing service decides to check ten of these frozen chicken dinners and reject the claim unless at least seven of them contain at least three ounces of chicken.find the probability that the testing services will make the error of (a0 rejecting the claim even though it is true; (b) not rejecting the claim when in really only 70% of...
At the beginning of 2019, the Healthy Life Food Company purchased equipment for $42 million to be used in the manufacture of a new line of gourmet frozen foods.
At the beginning of 2019, the Healthy Life Food Company purchased equipment for $42 million to be used in the manufacture of a new line of gourmet frozen foods. The equipment was estimated to have a 10-year service life and no residual value. The straight-line depreciation method was used to measure depreciation for 2019 and 2020. Late in 2021, it became apparent that sales of the new frozen food line were significantly below expectations. The company decided to continue production...
It is known that the average American orders food from a restaurant in person or as...
It is known that the average American orders food from a restaurant in person or as take out 4.2 times a week on average. Suppose we take a sample of 30 Americans and find that the average amount of meals ordered out is 3.2 per week with a sample standard deviation of 2.82 meals. We are interested in testing if the average amount of meals ordered out is actually lower than 4.2 now. Using the sample of 30 adults, what...
Food orders are produced at three locations on the SFU Burnaby campus: West Mall, Student Services...
Food orders are produced at three locations on the SFU Burnaby campus: West Mall, Student Services (Maggie Benston) Building, and East Concourse. • There are two primary clusters of delivery demand: AQ and Residences. • Delivering orders requires time during which the food loses freshness so the total should be minimized. • Below are the average monthly demand for orders, the maximum production capacity, and the delivery time per order demand food orders AQ 40 residences 20 production capacity (max)...
Assume that you have a factory that produces frozen food and uses water from the river...
Assume that you have a factory that produces frozen food and uses water from the river next to you. There is another plant that produces chemical waste and throws it to the river, such waste gets to you when you pull water from the river. Thus, you must pay for a very expensive process of cleaning the water. There are two possibilities to correct this externality: One is to engage into a contract with the other plant, such that they...
Assume that you have a factory that produces frozen food and uses water from the river...
Assume that you have a factory that produces frozen food and uses water from the river next to you. There is another plant that produces chemical waste and throws it to the river, such waste gets to you when you pull water from the river. Thus, you must pay for a very expensive process of cleaning the water. There are two possibilities to correct this externality: One is to engage into a contract with the other plant, such that they...
Italian pasta increasingly made of wheat from Canada and U.S” (Durishin, M. & Robinson, A. Vancouver...
Italian pasta increasingly made of wheat from Canada and U.S” (Durishin, M. & Robinson, A. Vancouver Sun Newspaper, Tuesday, December 3, 2019, p. B4). “Italy, the world’s biggest pasta consumer, can’t abandon the North American wheat used to make spaghetti and macaroni after smaller plantings and foul weather curbed output in the European Union. Output in Canada and the U.S. also declined as excessive rain hampered harvests. Farmers also reduced acreage for durum, which can be challenging to grow. Prices...
“Italian pasta increasingly made of wheat from Canada and U.S” (Durishin, M. & Robinson, A. Vancouver...
“Italian pasta increasingly made of wheat from Canada and U.S” (Durishin, M. & Robinson, A. Vancouver Sun Newspaper, Tuesday, December 3, 2019, p. B4). Suppose that Rajdeep loves lasagna. The following table presents a measurement of Rajdeep’s Total Utility, TU of Lasagna for each successive serving. Servings of Lasagna Total Utility, TU Marginal Utility, MU 0 0 1 20 2 50 3 90 4 120 5 140 6 155 7 165 8 170 Given the Total Utility in the Utility...
Some frozen food dinners were randomly selected from this week's production and destroyed in order to...
Some frozen food dinners were randomly selected from this week's production and destroyed in order to measure their actual calorie content. The claimed calorie content is 200. Here are the calorie counts for each frozen dinner selected: 190 203 210 212 186 207 196 208 198 214 208 189 Assume the distribution of calories is normal. (a) The test statistic (z/t) is? Use two decimals. (b) Does the sample indicate that the mean calorie content is 200? Set α=0.04. (c)...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT