Redfern Butchery Orders Most of Its Items in Lot Sizes

question 100

Essay

Redfern Butchery orders most of its items in lot sizes of 10 units.Average annual demand per side of venison is 720 units per year.Ordering costs are $32.50 per order with an average purchasing price of $130.Annual inventory carrying costs are estimated to be 40% of the unit cost.
Required:
a.Determine the economic order quantity (EOQ).
b.Determine the annual cost savings if the shop changes from an order size of 10 units to the economic order quantity (EOQ).
c.Since the shelf life is limited,the Redfern Butchery must keep the inventory moving.Assuming a 360-day year,determine the optimal lot size under each of the following: (1)a 20-day shelf life and (2)a 10-day shelf life.
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Definitions:

Contract

A legally binding agreement between two or more parties that outlines the terms and conditions of their arrangement and obligates them to comply with those terms.

Promises

Commitments or assurances by one party to another that certain actions will or will not be undertaken.

Covenant Not to Compete

an agreement often found in employment contracts restricting an employee's ability to work in similar employment or start a competitive business within a specific time frame and geographical area after leaving a job.

Employer/Employee Context

The environment and circumstances surrounding the relationship between an employer and their employees, which includes rights, obligations, and expectations.