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The Italian eatery at the Student Union orders pre-made, frozen calzones from a gourmet food distributor....

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General Management

The Italian eatery at the Student Union orders pre-made, frozencalzones from a gourmet food distributor. They cost $2.50 apiece.Ordering costs are $10 per order, and orders always take 4 days toarrive. The demand over a term (for which the eatery is open 100days) averages 80 calzones a day, with a standard deviation of 20calzones per day. Holding costs are 10% of the Eatery’s purchaseprice.

  1. a) What is the economic order quantity for calzones?

  2. b) if the management has specified that the risk of a stock outduring a cycle is 15.87%? What is the Reorder point?

  3. c) What is the annual holding costs and annual ordering costs ifwe use the EOQ?

d) The Eatery has decided to make calzones themselves. These aremade periodically in large batches, and everything not used thatday is frozen. The daily production rate, p, is 160 calzones.Assume that the holding cost, H, is now $.40/calzone per term andS, the setup cost, is $16 per run. All other parameters remainunchanged. What is the EPQ, and how often do we start a productioncycle? How many days do we run production?

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EconomicProduction Quantity refers to the    See Answer
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