Alice Opens an Aquarium Store in a Lively Shopping Mall

Essay

Alice opens an aquarium store in a lively shopping mall and finds business to be booming but she often stocks out of key items customers want. She decides to experiment with inventory control methods such as using a fixed order quantity FQS) and/or fixed order period FPS) systems. The FLUVAL 303 Pump, a high margin and profitable pump, is one of her best sellers but it stocks out frequently. You collect the following date with respect to this pump's sales.
$$\begin{array} { l l } \text { Demand } = 5 \text { units per week } & \text { Store open 50 weeks/year } \\\text { Order cost } = \$ 40 / \text { /order } & \text { Lead-time } = 3 \text { weeks } \\\text { Item cost } = \$ 80 / p u m p & \\\text { Inventory holding cost } = 15 \% \text { per year } &\end{array}$$
a. What is the Economic Order Quantity EOQ) rounded to the next highest number?
b. If the current order quantity used by Alice is 20 pumps per order, how much money can she save annually by adopting an EOQ ordering policy?
c. If Alice decides to use a FPS, what is the economic fixed order interval?