Optimizing Hummus Supply Chain and Production
Andronico’s in the financial centre is open 300 days a year. They sell organic hummus, and sales are approximately normally distributed, with an average of 100 tubs per day and a standard deviation of 25 tubs per day. The wholesale cost is $1.80/tub, and they calculate their annual holding costs by using 20% of the wholesale cost. Orders cost $50 to place, regardless of the number of tubs ordered and take four days to arrive
- What is organic hummus’s economic order quantity (EOQ)?
- What are the total annual cycle-stock holding costs for organic hummus?
- What are the total annual fixed order costs for organic hummus?
- Andronico’s has decided to save money and manufacture their hummus in-house. With a production rate of 600 tubs per day, their setup cost would only be $7.50/run, and their annual holding cost would be $0.20/tub, but all other parameters remain unchanged. What is the economic production quantity?