Problem
Mary's Fresh Fruits company has annual demand for fruit pulp of 122,499 pounds. The purchasing price per pound is $4.00. It takes five weeks to receive a delivery of pulp after ordering (mary chose alliteration over accuracy when naming her company). It costs Mary $121 to place each order and the annual carrying cost for Mary is 16 percent of the cost per pound.
1. What is the optimal order quantity of fruit pulp?
2. How frequently should Mary order pulp? In other words, what is the time between orders (TBO)?
3. How many orders will Mary place during the next year?
4. What is the resulting annual holding cost when the optimal quantity (part 1) is ordered?
5. What is the resulting annual ordering cost when the optimal quantity (part 1) is ordered?