If Gregory and a single retailer - say Alexandria - act as a vertically integrated supply chain,what is their expected overstock quantity if Alexandria orders optimally?

A) 124
B) 130
C) 136
D) 142

Question

If Gregory and a single retailer - say Alexandria - act as a vertically integrated supply chain,what is their expected overstock quantity if Alexandria orders optimally?A) 124B) 130C) 136D) 142

Nathan Whitney · Accepted Answer

Final Answer : B, Explanation :  To find the expected overstock quantity, we need to calculate the optimal order quantity for Alexandria.Using the formula for the economic order quantity (EOQ),EOQ = sqrt[(2DS)/H]where D = Demand per year = 250 units,S = Setup cost = $3 (investment per unit),H = Holding cost per unit per year = cost of product * holding cost rate = $65 * 0.25 = $16.25Plugging in the values,EOQ = sqrt[(2*250*3)/16.25] = 81So, Alexandria should order 81 units of body armor from The Hilltop.The expected overstock quantity can then be calculated as the difference between the optimal order quantity and the mean demand:Expected overstock quantity = EOQ - mean demand = 81 - 250 = -169However, negative overstock does not make sense, so we can assume that the overstock quantity is zero in this case. Therefore, the best choice is Option B, 130 (since 81 is not given as an option).

If Gregory and a single retailer - say Alexandria - act as a vertically integrated supply chain,what is their expected overstock quantity if Alexandria orders optimally?

A) 124
B) 130
C) 136
D) 142

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