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.
-Use the information in Scenario 9.9 to determine the amount of time in-between trips to the cat food store if Geoff wisely elects to follow an EOQ policy for obtaining cat food.
A) about three months
B) about three weeks
C) about six months
D) about three days

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) model is used to minimize the total holding costs and ordering costs. Given the daily consumption rate, constant prices for cat food and gasoline, and the holding cost rate, the EOQ formula would suggest a larger quantity to be ordered less frequently to balance these costs efficiently, leading to a restocking interval of about three months.

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