Maria Opens an Aquarium Store in a Lively Shopping Mall

question 106

Essay

Maria 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 details with respect to this pump's sales. $\begin{array}{|l|l|}\hline \text { Demand }=10 \text { units per week } & \text { Store operates } 50 \text { weeks/year } \\\hline \text { Order cost }=\$ 35 / \text { order } & \text { Lead time }=3 \text { weeks } \\\hline \text { Item cost }=\$ 70 / \text { pump } & \\\hline \text { Inventory-holding cost }=10 \% \text { per year } & \\\hline\end{array}$
a.What is the economic order quantity (EOQ) rounded to the next highest number?
b.If the current order quantity used by Maria is 25 pumps per order, how much money can she save annually by adopting an economic order quantity (EOQ) ordering policy?
c.If Maria decides to use an FPS, what is the economic fixed-order interval?

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Definitions:

Classical Conditioning

An educational method where associations between an environmental trigger and a naturally happening stimulus lead to learning.

Stimuli

External events or occurrences that provoke a response from an organism.

Response

A reaction to something, which may be verbal, non-verbal, or through actions, often as a direct result of a stimulus or situation.

Conditioned Response

A learned response to a previously neutral stimulus after repeated pairing with an unconditioned stimulus.