?Sam's Cat Hotel operates 52 weeks per? year, 6 days per? week, and uses a continuous review inventory system. It purchases kitty litter for ?$13.00 per bag. The following information is available about these? bags: follows?Demandequals=95 ?bags/week follows?Order costequals=?$58.00?/order follows?Annual holding costequals=35 percent of cost follows?Desired ?cycle-service levelequals=80 percent follows?Lead timeequals=2 weeks ?(12 working? days) follows?Standard deviation of weekly demandequals=15 bags follows?Current ?on-hand inventory is 320 ?bags, with no open orders or backorders.
a. Suppose that the weekly demand forecast of 95 bags is incorrect and actual demand averages only 75 bags per week. How much higher will total costs? be, owing to the distorted EOQ caused by this forecast? error? The costs will be ?$ nothing higher owing to the error in EOQ. ?(Enter your response rounded to two decimal? places.)
b. Suppose that actual demand is 75 bags but that ordering costs are cut to only ?$9.00 by using the internet to automate order placing.? However, the buyer does not tell? anyone, and the EOQ is not adjusted to reflect this reduction in S. How much higher will total costs? be, compared to what they could be if the EOQ were? adjusted? The costs will be ?$ nothing higher owing to the error in EOQ. ?