Sam's Cat Hotel operates 50 weeks per year, 6 days per week, and uses a continuous review inventory system. It purchases kitty litter for $12.00 per bag. The following information is available about these bags:> Demand = 95 bags/week> Order cost = $50.00/order> Annual holding cost = 20 percent of cost> Desired cycle-service level = 80 percent> Lead time =5 weeks (30 working days)> Standard deviation of weekly demand = 15 bags> Current on-hand inventory is 320 bags, with no open orders or backorders.a. Suppose that the weekly demand forecast of 95 bags is incorrect and actual demand averages only 75 bags per week. How much higher will total costs be, owing to the distorted EOQ caused by this forecast error?The costs will be $higher owing to the error in EOQ. (Enter your response rounded to two decimal places.)

Given, Actual demand = 95 bags/ week Annual demand D = 95*50 = 4750 bags Order cost S = $50 Holding…

a. Suppose that the weekly demand forecast of 95 bags is incorrect and actual demand averages only 75 bags per week. How much higher will total costs be, owing to the distorted EOQ caused by this forecast error? The costs will be $ higher owing to the error in EOQ. (Enter your response rounded to two decimal places.)

a. Suppose that the weekly demand forecast of 95 bags is incorrect and actual demand averages only 75 bags per week. How much higher will total costs be, owing to the distorted EOQ caused by this forecast error? The costs will be $ higher owing to the error in EOQ. (Enter your response rounded to two decimal places.)

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Chapter16: Lean Supply Chain Management

Section: Chapter Questions

Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...

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