Scenario 9.9
"Gollee those cats sure go through a lot of food," Geoff exclaimed as he saw the shopping list pad that had been pre-printed with the words "cat food" at the top. He pondered a different approach to shopping for the furry little darlings, reviewed his shopping records, and discovered the following. The price of cat food has held steady at 89 cents per can. Despite feigning indifference, each of the seven cats nibbles their way through an average of one can per day, three hundred sixty five days a year. The price of gasoline has held constant at $3.50 per gallon and his pickup uses a gallon each way to the cat food store. The cost to hold a can of cat food is 10% of the unit price.
-Using the information in Scenario 9.9 determine the economic order quantity for cat food.
A) 634 cans
B) 448 cans
C) 239 cans
D) 169 cans

Question

Quizplus · Accepted Answer

The economic order quantity (EOQ) formula is $\sqrt{\frac{2DS}{H}}$, where $D$ is the annual demand, $S$ is the ordering cost, and $H$ is the holding cost per unit per year. Here, $D = 7 \text{ cats} \times 365 \text{ days} = 2555 \text{ cans}$, $S = 2 \times \$3.50 = \$7.00$ (cost of gasoline for a round trip), and $H = 10\% \times \$0.89 = \$0.089$. Plugging these values into the EOQ formula gives $\sqrt{\frac{2 \times 2555 \times 7}{0.089}} \approx 634$ cans.

Scenario 9.9 "Gollee Those Cats Sure Go Through a Lot of Food