Kelly Opens an Aquarium Store in a Lively Shopping Mall

question 57

Multiple Choice

Kelly opens an aquarium 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 Fluval 303 pump, a high margin and profitable pump, is one of her best sellers, but it stocks out frequently. She collects the following data about the pump's sales.
$\begin{array} { l l } \text { Demand } = 10 \text { units per week } & \text { Store operates } 45 \text { weeks } / \text { year } \\\text { Order cost } = \$ 30 / \text { order } & \text { Lead time } = 3 \text { weeks } \\\text { Item cost } = \$ 80 / \text { pump } & \text { Standard deviation of weekly demand } = 4 \text { units } \\\text { Inventory-holding cost } = 15 \% \text { per year } & \text { Desired service level } = 90 \text { percent }\end{array}$
-If Kelly decides to use a fixed-period system (FPS) , the fixed-order interval (T) based on store economics is:

• A) less than or equal to 5 weeks.
• B) more than 5 but less than or equal to 10 weeks.
• C) more than 10 but less than or equal to 15 weeks.
• D) more than 15 but less than or equal to 20 weeks.

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Definitions:

Aggregate Output

The total value of all goods and services produced in an economy within a specific time period.

Prices

The amount of money required to purchase a good or service, which can fluctuate based on supply and demand dynamics.

Labor Force

The total number of people who are eligible and actively looking for work, including both the employed and unemployed individuals.

Discouraged Workers

Individuals who are not actively seeking employment due to believing that no jobs are available for them or there are none for which they would qualify.