Question

The Super Discount store (open 24 hours a day, every day) sells 8-packs of paper towels, at the rate of approximately 420 packs per week. Because the towels are so bulky, the annual cost to carry them in inventory is estimated at $0.50. The cost to place an order for more is $20, and it takes four days for an order to arrive. a. Find the optimal order quantity.

Answer 1

Missing word "b. What is the reorder point? c. How often should an order be placed?"

a. Optimal order quantity (EOQ) = (2AC/C)^(1/2). A=21840(420*52), O=20, C=0.5

Optimal order quantity (EOQ) = (2*21840*20/0.5))^(1/2)

Optimal order quantity (EOQ) = 1321.816931

Optimal order quantity (EOQ) = 1321.81 units

b. Reorder point = (420/7)*4

Reorder point = 60 * 4

Reorder point = 240 units

c. Time = 365*EOQ/A

Time = 365*1322/21840

Time = 22.0938645

Time = 22 days