Dutch Farms imports cheese by the case from Holland for distribution to its Texas retail outlets. During the year (360 days), Dutch Farms sells 1,080 cases of cheese. Because of spoilage, Dutch Farms estimates that it costs the firm $6 per year to store a case of cheese. The cost to place an order runs about $10. The desired service level is 98 percent. The demand for cheese during the 1-day lead time is shown below.
a. Calculate the EOQ for Dutch Farms.
b. How many cases should Dutch Farms hold as safety stock against stockouts?
c. Dutch Farms owns a refrigerated warehouse with a capacity of 500 square feet. If each case of cheese requires 10 square feet and must be refrigerated, how much per year could Dutch Farms afford to spend on renting additional space?