Ann Chovies, owner of Perfect Pasta Pizza Parlor, uses 20 pounds of pepperoni each day in preparing pizzas. Order costs for pepperoni are $10.00 per order, and carrying costs are 4 cents per pound per day. Lead time for each order is 3 days, and the pepperoni itself costs $3.00 per pound.
What is the economic order quantity for pepperoni?
I know the formula is SQRT (2DS/H).
Any help?
Thanks!!
Ahhh....I see....
Go here: Economic order quantity - Wikipedia, the free encyclopedia
Looks like you'll become an ordering specialist if you go there
Are Pep Perrony and Ann Chovies an item ?
Well, I see that your solution works out...but a question, why wouldn't the cost be .04 * 20 * 365? Wouldn't we have to account for the pounds used each day? I guess I've completely fallen off my rocker!
I do owe you a pizza!
There's another part to this question....feel like conquering it as well?
Thanks again!!!
Li'l "illustration" of how it works, and why answer = 100;
make it a 360 days period (easier to deal with):
1) Order 80 pounds every 4 days
order costs = 360/4 * 10 = $900
carry costs = .04(80+60+40+20) = 8 ; 8 * 360/4 = $720
total = 900 + 720 = $1620
2) Order 100 pounds every 5 days
order costs = 360/5 * 10 = $720
carry costs = .04(100+80+60+40+20) = 12 ; 12 * 360/5 = $864
total = 720 + 864 = $1584
3) Order 120 pounds every 6 days
order costs = 360/6 * 10 = $600
carry costs = .04(120+100+80+60+40+20) = 16.80 ; 16.80 * 360/6 = $1008
total = 600 + 1008 = $1608
...and the winnah is .....?
NOTE: purchase price has NOTHING to do with this