Question

Judith Thompson is the manager of the student center cafeteria. She is introducing pizza as a menu item. The pizza is ordered frozen from a local pizza establishment and baked at the cafeteria. Judith anticipates a weekly demand of 10 pizzas. The cafeteria is open 45 weeks a year, 5 days a week. The ordering cost is $15 and the holding cost is $0.40 per pizza per year. What is the optimal number of pizzas Judith should order?

Answer 1

Answer:

The optimal number of pizza that Judith should order is 184.

Explanation:

Judith is introducing pizza in the cafeteria menu.

She is expecting a weekly demand of 10 pizzas.

The cafeteria is open 45 weeks a year.

The ordering cost of pizza for Judith is $15 and the holding cost is $0.40.

The annual demand for pizza

= $45\ \times\ 10$

= 450

The optimal number of pizza will be the economic order quantity.

Economic order quantity can be defined as the optimal order quantity that a company should make to minimize its total cost of inventory.

Economic order quantity

= $\sqrt{\frac{2\ \times\ Annual\ demand\ \times\ order\ cost}{Holding\ cost} }$

= $\sqrt{\frac{2\ \times\ 450\ \times\ 15}{0.40} }$

= $\sqrt{33,750}$

= 183.71

So the optimal number of pizza that Judith should order is 184.