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2. You are the Northeast Regional Manager for the Aramark Food Services Company's "College Cafeteria Management" Division. You need to order Coca Cola 12-ounce cans for 20 colleges and universities in your region. Your annual demand is 200,000 cans, with an ordering cost of $10.00 per order and a holding cost of $0.20 per can. The cafeterias are open 7 days per week, except for:

- 10 days during the Christmas-New Year's Holiday break
- 4 days for the Thanksgiving break
- 7 days for Spring Break

2.1 What is your Economic Order Quantity (Q)?

A. 5,000 cans
B. 3,950 cans
C. 4,472 cans
D. 8,000 cans

2.2 How many orders (N) will you need to place in a year?

A. 50 orders
B. 45 orders
C. 40 orders
D. 19 orders

2.3 How many working days (W) are there in this manager's region in a regular, non-leap year?

A. 365
B. 355
C. 351
D. 344

2.4 What is the time span (T), in days, between orders?

A. 5 days
B. 8 days
C. 11 days
D. 15 days

2.5 What is your reorder point (ROP) if the Coca Cola Company's lead time to resupply you is 4 days?

A. 2,575 cans
B. 1,150 cans
C. 2,326 cans
D. 1,900 cans

2.6 If Aramark wants a 3-day safety stock during the winter months, what will be your reorder point with safety stock [ROP(ss)]?

A. 6,500 cans
B. 7,500 cans
C. 3,000 cans
D. 4,070 cans

2.7 Which of the following helps explain how the Reorder Point (ROP) works in conjunction with the Economic Order Quantity (Q), the number of orders (N), and the time between orders (T)?

A. The Economic Order Quantity (Q) and the Annual Demand (D) are used to determine the number of orders (N).
B. The number of orders (N) and the number of working days (W) are used to determine the time span between orders (T).
C. Orders are placed every T days unless the inventory on hand falls to or below the Reorder Point.
D. Only A and B.
E. Only B and C.
F. All of A, B, and C.

2.8 The objective of Inventory Management is to balance inventory investment (cost) and customer service.

A. TRUE
B. FALSE

2.9 The Economic Order Quantity (EOQ), the number of orders, the Reorder Point (ROP), and the time between orders are important analytics in Inventory Management.

A. TRUE
B. FALSE

2.10 The number of working days for a firm is an important input in calculating the components of the Economic Order Quantity (EOQ) and the Economic Production Quantity (EPQ).

A. TRUE
B. FALSE

Answer :

Final answer:

The Economic Order Quantity (Q) is 2,000 cans, the number of orders (N) needed in a year is 100, the time span between orders (T) is approximately 3.44 days, the reorder point (ROP) is 581.40 cans, the reorder point with safety stock (ROP(ss)) is 2,325.60 cans, and the ROP works in conjunction with the EOQ, N, and T. The objective of inventory management is to balance inventory investment and customer service.

Explanation:

Inventory management is an important aspect of business operations, and one key concept in this field is the Economic Order Quantity (EOQ). The EOQ is the optimal order quantity that minimizes the total cost of ordering and holding inventory. To calculate the EOQ, we need to consider the annual demand, ordering cost, and holding cost.

In this case, the annual demand for Coca Cola 12-ounce cans is 200,000 cans. The ordering cost is $10.00 per order, and the holding cost is $0.20 per can. We also need to take into account the number of working days in a year, excluding holidays.

First, let's calculate the Economic Order Quantity (Q). The formula for EOQ is:

EOQ = sqrt((2 * annual demand * ordering cost) / holding cost)

Substituting the given values:

EOQ = sqrt((2 * 200,000 * $10.00) / $0.20) = sqrt(4,000,000) = 2,000 cans

Therefore, the Economic Order Quantity (Q) is 2,000 cans.

Next, let's calculate the number of orders (N) needed in a year. The formula for N is:

N = annual demand / Q

Substituting the given values:

N = 200,000 / 2,000 = 100 orders

Therefore, the number of orders (N) needed in a year is 100.

Now, let's calculate the time span between orders (T). We need to consider the number of working days in a year, excluding holidays. In this case, the college cafeterias are closed for 10 days during the Christmas-New Year's Holiday break, 4 days for the Thanksgiving break, and 7 days for Spring Break. Therefore, the number of working days in a year is:

365 - 10 - 4 - 7 = 344 days

Now, we can calculate the time span between orders (T) using the formula:

T = number of working days / N

Substituting the values:

T = 344 / 100 = 3.44 days

Therefore, the time span between orders (T) is approximately 3.44 days.

Next, let's calculate the reorder point (ROP) if the lead time for re-supply is 4 days. The formula for ROP is:

ROP = demand during lead time

In this case, the demand during lead time is the same as the daily demand, which is the annual demand divided by the number of working days in a year:

Daily demand = annual demand / number of working days = 200,000 / 344 = 581.40 cans

Therefore, the reorder point (ROP) is 581.40 cans.

If Aramark wants a 3-day safety stock during the winter months, the reorder point with safety stock (ROP(ss)) can be calculated by adding the safety stock to the reorder point:

ROP(ss) = ROP + safety stock

In this case, the safety stock is the daily demand multiplied by the number of safety stock days:

Safety stock = daily demand * number of safety stock days = 581.40 * 3 = 1,744.20 cans

Therefore, the reorder point with safety stock (ROP(ss)) is 581.40 + 1,744.20 = 2,325.60 cans.

The reorder point (ROP) works in conjunction with the Economic Order Quantity (Q), the number of orders (N), and the time span between orders (T). The EOQ determines the optimal order quantity, while the number of orders and the time span between orders help determine the frequency of ordering. The ROP is the inventory level at which a new order should be placed to avoid stockouts. Orders are placed every T days unless the inventory on hand falls to or below the ROP.

The objective of inventory management is to balance inventory investment (cost) and customer service. By optimizing the EOQ, N, T, and ROP, businesses can achieve this balance.

In conclusion, the Economic Order Quantity (Q) is 2,000 cans, the number of orders (N) needed in a year is 100, the time span between orders (T) is approximately 3.44 days, the reorder point (ROP) is 581.40 cans, the reorder point with safety stock (ROP(ss)) is 2,325.60 cans, and the ROP works in conjunction with the EOQ, N, and T. The objective of inventory management is to balance inventory investment and customer service.

Learn more about inventory management and economic order quantity (eoq) here:

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