Economics > AQA Questions and Marking Scheme > ISEN 370 Sample Test 2 Questions with Solutions (All)

ISEN 370 Sample Test 2 Questions with Solutions

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The famous Ernie from Sesame Street continually faces replenishment decisions concerning his cookie supply. The Cookie Monster devours the cookies at an average rate of 200 per day. The cookies cost... $0.03 each. Ernie is getting fed up with having to go to the store once a week. His friend Bert has offered to do a study to help Ernie with his problem. a. If Ernie is implicitly following an EOQ policy already with his weekly replenishment, what can Bert say about the implicit values of the two missing parameters? Solution: Weekly demand equals 1,400 units, which implies an annual demand () of 72,800. Weekly replenishment implies a lot size of Q = 1,400 units. If this is equal to the EOQ, then we must have ? = √ 2?? ?? = √ 2?(72800) ?(0.03) = 2203.028√ ? ? . Because Q = 1,400, this implies √ ? ? = 1400 2203.08 = 0.63549, which implies ? ? = 0.40385. Note that if we use a daily demand of  = 200, then we get K/i = 147. Note that if we use a weekly demand of  = 1400, then we get K/i = 21 [Show More]

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