Question: What is the effect on EOQ and total cost of the following types of changes for the data in problem 1? a. A 40 percent increase in demand.
b. A 20 percent increase in carrying charge.
c. Use a spreadsheet to study the relationship between lot size and carrying cost.
problem 1
The Always Fresh Grocery Store carries a particular brand of tea that has the following characteristics: Sales = 8 cases per week Ordering cost = $10 per order Carrying charge = 20 percent per year Item cost = $80 per case
a. How many cases should be ordered at a time?
b. How often will tea be ordered?
c. What is the annual cost of ordering and carrying tea?
d. What factors might cause the firm to order a larger or smaller amount than the EOQ?