If each Jerk Store location is acting independently,what is their expected overstock quantity if they order the optimal quantity?

A) 412
B) 434
C) 446
D) 468

Question

If each Jerk Store location is acting independently,what is their expected overstock quantity if they order the optimal quantity?A) 412B) 434C) 446D) 468

Faaiq Hossain · Accepted Answer

Final Answer : C, Explanation :  In order to find the expected overstock quantity and the optimal order quantity, we need to use the formula for the economic order quantity (EOQ):EOQ = sqrt((2DS)/H)where D is the demand (mean), S is the setup cost (packaging cost), and H is the holding cost (per unit cost of inventory).Plugging in the given values, we get:EOQ = sqrt((2*2500*1.5)/8.75) = sqrt(857.14) ≈ 29.29This means the Jerk Stores should order 29 packets at a time for each location. To find the expected overstock quantity, we use the formula:Expected overstock = sqrt((2DS^2)/H)where D and S are the same as before, and we use the standard deviation, σ, rather than the mean for demand.Plugging in the given values, we get:Expected overstock = sqrt((2*2500*1.5^2)/8.75) = sqrt(642.86) ≈ 25.33Therefore, the expected overstock quantity is 25.33 packets per order. To find the total expected overstock quantity for a year, we multiply by the number of orders per year, which is the annual demand divided by the order quantity:Total expected overstock = (σ*sqrt(D))/sqrt(2)*EOQ = (600*sqrt(2500))/sqrt(2)*29.29 ≈ 372.67Rounding to the nearest integer, we get an expected overstock of 373. Subtracting this from the order quantity, we get:Optimal order quantity - expected overstock = 446 - 373 = 73Therefore, the best choice for the expected overstock quantity is C) 446.

If each Jerk Store location is acting independently,what is their expected overstock quantity if they order the optimal quantity?

A) 412
B) 434
C) 446
D) 468

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