Nothing is too good for my cats, so all their food is custom made at Catastic, who operates a specialty organic food mill in an adjacent state. We need 500 pounds of food per year, distributed evenly throughout the year
It costs $20 shipping and handling to place and receive an order for this delicious food. The cats are fed only on week days, so the 500 pounds per year translates to 2 pounds per day (we go out to restaurants on the weekends). Of course, my cats don't always eat exactly 2 pounds per day, their demand could more precisely be described as an average of 2 pounds and a standard deviation of 0.3 pounds per day. It takes ten days on average to receive an order for food once I place it. It costs $35 to hold a pound of food in inventory for a year and the food costs $850 per pound. It's expensive, yes, but again, nothing is too good for my cats.
What amount should I order and when should I order it if I want only a 1% chance of running out of food for my cats?
What will be an ideal response?
Answer:
The economic order quantity is Q ∗ = = 23.9 pounds.
The reorder point is 2 ∗ 10 + 2.32 ∗ = 20 + 2.33 ∗ .94 = 22.207 pounds
*meow*
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