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 cup of English peas. It costs two cents to hold a 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 optimal order quantity? What is the average inventory if they order at the optimal order quantity? How many orders per year does the diner place if they order at the economic order quantity? What is the average flow time of a cup of peas if the diner orders at the economic order quantity?

Answer 1

Answer:

Check the explanation

Explanation:

Here, Cost of Inventory will be the average inventory cost for EOQ quantity = Holding cost per unit * EOQ/2

=$(0.02*2670) = $53.40

C. Average Inventory = EOQ/2 = 2670/2 = 1335

Therefore Average flow time = Average Inventory/ Demand = 1335/457 = 2.92 week

D. We know that EOQ is proportional to Demand^(1/2)

And, Average Flow time is directly and inversely proportional to EOQ and Demand respectively

Average Flow time is proportional to Demand^(1/2)/Demand = Demand ^(-1/2)

Therefore,

Initial Average Flow time/Current Flow time = Current Demand ^(1/2)/{Initial demand^(1/2)} ....[Ratio of the flow times = inverse ratio of the square root of their corresponding demands]

2.92/5= SQRT(Current Demand/457)

Current Demand = 156