Brenda Opens a Pool and Spa Store in a Lively

question 83

Multiple Choice

Brenda opens a pool and spa store in a lively shopping mall and finds business to be booming, but she often stocks out of key items customers want. She decides to experiment with inventory control methods such as using a fixed order quantity (FQS) and/or fixed order period (FPS) systems. The 28-ounce bottle of Super Algaecide (SA) is a high margin stock keeping unit (SKU) , but it stocks out frequently. Ten SA bottles come in each box, and she orders boxes from a vendor 160 miles away. Brenda is busy running the store and seldom has time to review store inventory status and order the right quantity at the right time. She collects the following data with respect to these SA sales.
$\begin{array} { l l } \text { Demand } = 10 \text { boxes per week } & \text { Store operates } 50 \text { weeks } / \text { year } \\\text { Order cost } = \$ 40 / \text { order } & \text { Lead time } = 3 \text { weeks } \\\text { Item cost } = \$ 80 / \text { box } & \text { Std. deviation in weekly demand } = 6 \\\text { Inventory-holding cost } = 15 \% \text { per year } & \text { Service level } = 96 \%\end{array}$
-If the current order quantity for SA is 20 boxes per order, how much money can she save per year by adopting an economic order quantity (EOQ) ordering policy?

• A) Less than $100
• B) More than $100 but less than or equal to $200
• C) More than $300 but less than or equal to $400
• D) More than $400

Grasp the concepts of scarcity and how it affects choices.

Comprehend the difference between equality and efficiency in economic terms.

Recognize the basic principles of decision making in economics.

Identify the role of opportunity cost in economic decisions.

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Definitions:

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