Question Details

Answered) Kristen and her roommate produce two types of cookies: regular cookies and chocolate chip cookies.


 Kristen and her roommate produce two types of cookies: regular cookies and chocolate chip cookies. Since Kristen purchases the dough of the regular cookies from supplier A and the dough of the chocolate chip cookies from supplier B, she and her roommate only spoon, bake, and package the cookies before selling to the customers. 

 

Daily demand for regular cookies is normally distributed with mean 25 dozen and standard deviation 15, daily demand for chocolate chip cookies is normally distributed with mean 10 dozen and standard deviation 8 and independent of the demand of regular cookies. Kristen can produce a dozen cookies from a pound of cookie dough. 

 

Order cost of the cookie doughs from each supplier is $20 per order (independent of the order quantity) and holding cost of a pound of cookie dough is estimated as $0.8 per pound per year for both type of doughs. Since Kristen bakes the cookies after she received the customer order and time spent for spooning, baking, and packaging is very short, holding cost associated with baked cookies is negligible.

 

The lead-time for the orders from both suppliers is constant and 5 days. Kristenâs goal is to keep the probability of stock-outs at most 1% for both type of doughs and she works 360 days in a year. Since Kristen took BUAD 311, she uses (ROP,Q) system to manage the inventories.

 a) (3 points) What is the order quantity for each type of doughs?

 

 

b) (3 points) What are the reorder points and safety stock levels for each type of doughs such that the probability of stock-outs is at most 1%?

 

 

c) (3 points) What is the annual inventory holding cost for each type of doughs?

 

 

d) (2 points) What are the annual order cost and annual total inventory related cost for each type of doughs?

 

 

e) (3 points) What is the inventory turnover rate for each types of doughs?

 

 

The roommate suggests to stop ordering chocolate chip cookie doughs from supplier B. Moreover, when making a chocolate chip cookies, she suggests adding the chocolate chips to the regular cookie dough just before spooning the cookies. Therefore, they can still produce both type of cookies. Assume that the cost of chocolate chips is negligible and demand for both types of cookies do not change. 

 


 

f) (3 points) What is the new order quantity based on the suggestion of the roommate?

 

 

g) (3 points) What are the new reorder point and the safety stock level?

 

 

h) (3 points) What is the annual inventory holding cost?

 

 

i) (3 points) What are the annual order cost and annual total inventory related cost?

 

 

j) (2 points) What is the inventory turnover rate?

 

 

k) (2 points) How much does the annual total inventory related cost change under this suggestion? Explain the reason of this change in words.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


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