Q. A flower shop uses 800 clay pots a month. Pots are purchased at $2 each. Annual carrying costs are approximate d at $0.60 per pot per year and ordering costs are $20 per order. Manager has been currently using an order size of 1600 flower pots per order.

• Illustrate what additional cost is shop incurring by using this current order size rather than economic order quantity?

• Or than potential cost savings, illustrate what benefit(s) would using optimal order quantity yield?

• Illustrate what is number of orders per year if manager uses current order quantity of 1600?

• Illustrate what is number of orders per year if manager uses Economic Order Quantity?

• Illustrate what is maximum number of flower pots that are held in inventory in a given ordering cycle?

• Explain how long will each order last (in months) if manager uses Economic Order Quantity?

• Assume that lead time for pots is 1 month. Illustrate what is Reorder Point? Verbally, interpret meaning of this Reorder Point.