Anderson florists likes to keep orchids always on hand. annual demand is 1000 or
ID: 453325 • Letter: A
Question
Anderson florists likes to keep orchids always on hand. annual demand is 1000 orchids per month, it costs $300 per order, and Anderson florists experiences a 15% holding cost of the $60 orchid unit cost.
a. find the EOQ
b. determind optimal number of orders per year
c. calculate th annual holding cost
d. assuming a lead time of 1 week, determine Anderson reorder point
e. assuming a standard deviation of 100 orchids per month, how much saftey stock should Anderson Florists order to be 95% confident of not stocking out in a given month?
Explanation / Answer
a)EOQ=Sqrt(2*annual demand*ordering cost/Holding Cost)=sqrt(2*(12*1000)*300/(0.15*60))=894.43
b) Number of orders=annual demand/EOQ=12*1000/894.43=13.42==14
c)Annual holding cost= EOQ*Holding Cost/2=894.43*(0.15*60)/2=4024.94
d)Reorder point=Monthly demand *lead time=(1000)*(1/4)=250
e)Safety stock=z*sd*Sqrt(L)
Z value at 95% confidence interval=1.64
Safety stock=1.64*100*sqrt(1/4)=82