Suppose that the R & B Beverage Company has a soft drink product that shows a constant annual demand rate of 3600 cases. A case of the soft drink costs R & B $3. Ordering costs $20 per order and holding costs are 25% of the value of the inventory. R & B has 250 working days per year, and the lead time is 5 days. Identify the following aspects of the inventory policy.

Hmmmmm. Is something missing here?

To identify the aspects of the inventory policy for the R & B Beverage Company, we need to calculate the following:

1. Economic Order Quantity (EOQ): The EOQ can be calculated using the formula:

EOQ = √((2 * D * S) / H)

Where:
D = Annual demand rate = 3600 cases
S = Ordering cost per order = $20
H = Holding cost percentage = 25% * (case cost * cases in inventory)

Assuming the case cost is $3, we can calculate the H value as:
H = 25% * ($3 * EOQ)

2. Reorder Point (ROP): The ROP is the inventory level at which a new order should be placed. To calculate the ROP, we can use the formula:

ROP = D * L

Where:
L = Lead time = 5 days

3. Total annual cost: The total annual cost can be calculated as the sum of ordering costs and holding costs. Let's break it down into the two components:

Total ordering cost = (D / EOQ) * S
Total holding cost = (H / EOQ) * (D / 2)

Total annual cost = Total ordering cost + Total holding cost

Now, let's calculate these aspects step by step:
Step 1: Calculate H
H = 25% * ($3 * EOQ)

Step 2: Calculate EOQ
EOQ = √((2 * D * S) / H)

Step 3: Calculate ROP
ROP = D * L

Step 4: Calculate Total ordering cost
Total ordering cost = (D / EOQ) * S

Step 5: Calculate Total holding cost
Total holding cost = (H / EOQ) * (D / 2)

Step 6: Calculate Total annual cost
Total annual cost = Total ordering cost + Total holding cost

To identify the aspects of the inventory policy for the R & B Beverage Company, we need to determine the Economic Order Quantity (EOQ), reorder point, and safety stock.

1. Economic Order Quantity (EOQ):
EOQ is the optimal order quantity at which the total cost of ordering and holding inventory is minimized. It can be calculated using the EOQ formula:

EOQ = sqrt( (2 * Annual Demand * Ordering Cost) / Holding Cost per Unit)

Given values:
Annual Demand (D) = 3600 cases
Ordering Cost (S) = $20 per order
Holding Cost (%H) = 25% of the value of inventory per unit

To calculate the EOQ, we also need the unit cost of the soft drink. Since the cost per case is $3, the unit cost (C) is $3.

Substituting the values into the formula:
EOQ = sqrt((2 * 3600 * 20) / (0.25 * 3))

Simplifying the equation:
EOQ = sqrt(144,000) / 2.5
EOQ = 120 cases

Therefore, the EOQ for the R & B Beverage Company is 120 cases of the soft drink.

2. Reorder Point:
The reorder point indicates when to place an order to replenish the inventory. It takes into account the lead time demand, which is the demand during the time it takes to receive the order.

Reorder Point = (Lead Time Demand) + Safety Stock

To calculate the reorder point, we need to find the lead time demand and determine the safety stock.

Lead Time Demand = Daily Demand * Lead Time
Given:
Daily Demand = Annual Demand / Number of Working Days
Lead Time = 5 days

Substituting the values:
Daily Demand = 3600 cases / 250 working days = 14.4 cases per day
Lead Time Demand = 14.4 cases per day * 5 days = 72 cases

3. Safety Stock:
Safety stock is a buffer quantity held to account for demand variability and uncertainties. It ensures that the company does not face stockouts during unexpected high-demand periods or longer lead times.

Safety Stock = (Z * √(Lead Time) * σ), where Z is the Z-score and σ is the standard deviation of the demand during the lead time.

To find the Z-score, we need to determine the desired service level. Assuming a 95% service level, the Z-score is approximately 1.96.

Substituting the values:
Safety Stock = (1.96 * √5 * σ)

Since the standard deviation (σ) is not provided in the given information, it is impossible to calculate the precise safety stock. However, the R & B Beverage Company could estimate the standard deviation based on historical data or industry standards.

Overall, to fully identify the aspects of the inventory policy for the R & B Beverage Company, we need the standard deviation of demand during the lead time.