Question

The rising popularity of bubble and squeak as a breakfast item on the menu has resulted in a steady demand for peas. Over the course of the past week, 457 patrons have ordered the hearty breakfast and each serving contains a half cup of English peas. It costs two cents to hold a half cup of peas in inventory for a year and $3 to place an order (remember they come all the way from England!). It takes two weeks to ship a container from England loaded with peas. What is the average inventory if they order at the optimal order quantity?

Answer 1

Answer:

The average inventory if they order at the optimal order quantity is 1.335

Explanation:

Accordin to the formula

Optimal order quantity = $\sqrt{2*yearly demand * Order cost/Holding cost}$

=$\sqrt{2*52*457*3 / 0.02}$

= 2670

Average inventory = Optimal order quantity / 2 = 1335.