5 Long Question

Q.1. Service Levels at Franchisee and Company Stores. (25 points)A. Calculate the understocking cost (Cu) for franchisees and the overstocking cost (Co) for
franchisees. (5 pts)
B. Calculate the understocking cost (Cu) for company-owned stores and the overstocking
cost (Co) for company-owned stores. (5 pts)
C. Determine the Best Service Level (SL) for cupcake stocking at franchisee stores. (5 pts)
D. Determine the Best Service Level (SL) for cupcake stocking at company-owned stores.
(5 pts)
E. Explain why centralized decision-making for store-level inventory leads to higher overall
profitability for the entire Just Baked supply chain compared to allowing franchisees to
do their own ordering. (5 pts)
Q.2 Exposure Period. (12 Points)
A. Using the data provided in the case study, explain how Just Baked manages the risk of
stockouts during the exposure period for cake mix. What strategies could they
implement to reduce this risk? (4 pts)
B. Calculate the review period for cake mix based on the bi-weekly planning schedule. (4
pts)
C. Given a lead time of 3 days, compute the total exposure period for cake mix inventory
planning. Discuss how variability in lead time might impact the exposure period and
inventory levels. (4 pts)
Q.3 Stockout cost and Holding Cost: Cake Mix (12 Points)
A. Compute the cost of a stockout of cake mix, considering that the extra labor cost is
$20/hour and 15 hours of labor are needed, along with an additional $400 for cake mix.
(4 pts)
B. Compute the annual holding cost of a pallet of cake mix if the cost of capital is 15% and
the value of a pallet is $1500. (4 pts)
C. Compute the monthly holding cost per pallet of cake mix. (4 pts)
Q.4 Target Stock and Ordering Decisions. (5 pts)
Compute the Target Stock Level for vanilla cake mix using the provided demand
distribution data.
Q.5 Ordering Eggs. (16 pts)
A. Compute the Economic Order Quantity (EOQ) for eggs. (4 pts)
B. Compute the safety stock of eggs it would take to assure a 99.87% service level. (4 pts)
C. Compute the Reorder Point (ROP) for eggs, using the safety stock calculated in part 5b.
(4 pts)
D. Express the average daily quantity of eggs on hand in Days of Supply using your
answers to parts 5a and 5b. (4 pts)