5654-6-8P AID: 5429599 | 31/10/2018

Simple Online Ordering System: It is highly useful method of online ordering where
the order is placed virtually and is processed manually by the person in the marketplace.
Here, the customer visits the marketplace and has convenience of placing the order before
the visit.

In the original problem we have to ascertain weekly holding cost, setup cost associated
with shipping and handling an order, demand and holding cost, using EOQ model we will
get all the inputs. We will also get the ordering pattern for each orders in different
scenarios using the given patterns.

(a)

Weekly holding cost per case is $3.366 per week

As per the below calculations:

Weekly cost of capital* Cost per case + Weekly Inventory holding cost per cas
e

= (15%/50)*($120+$2) + $3 = $3.366

(b)

K (Setup cost associated with shipping and handling an order) = $290 + $10
= $300
84.44 cases per order
R (Demand) = 40 cases per week

H (Holding cost) = $3.366 per week (from above)

Therefore, using EOQ, optimal Q =2* K * R * H = 84.44 cases per order

(c) Impact of this system on the ordering pattern would be:

1)Frequency of orders increase and average inventory decreases

2)Frequency of orders increase and average inventory increases

3)Frequency of orders decrease and average inventory decreases
4)Frequency of orders decrease and average inventory increases
5)Frequency of orders and average inventory remain unchanged