5. Ollah’s Organic Pet Shop sells about 4,000 bags of free- range dog biscuits every year. The fixed ordering cost is $15, and the cost of holding a bag in inventory for a year is $2. a. (*) What is the economic order quantity for the bis- cuits? b. (**) Suppose Ollah decides to order 200 bags at a time. What would the total ordering and holding costs for the year be? (For this problem, don’t consider safety stock when calculating holding costs.) c. (**) Average weekly demand for free-range dog biscuits is 80 bags per week, with a standard deviation of 16 bags. Ollah uses a continuous inventory review system to manage inventory of the biscuits. Ollah wants to set the reorder point high enough that there is only a 5% chance of running out before the next order comes in. Assuming that the lead time is a constant 2 weeks, what should the reorder point be? d. (**) Suppose Ollah decides to use a periodic review system to manage the free-range dog biscuits, with the vendor checking inventory levels every week. Under this scenario, what would the restocking level be, assuming the same demand and lead time char- acteristics listed in problem 13 and the same 95% service level? (Note that because the standard devia- tion of weekly demand is 16, basic statistics tells us the standard deviation of demand over 3 weeks will be V3 X 16 = 28.)

Just answer Part B
Kipling Equipment Inc. must decide to produce either a face mask or a face shield to alleviate the spread of a quickly evolving coronavirus. The face mask is disposable and developing it could potentially lead to a profit of $215,000 if competition is high or a profit of $565,000 if competition is low. The face shield, on the other hand, is reusable and has the potential of generating a fixed profit of $382,000 irrespective of high or low competition. The probability of high competition is 63% while that of low competition is 37%.
Part A
a) What is the expected monetary value of the optimal decision? $ Correct
b) Based on expected monetary value, what should the Kipling do? Select an answer Produce face shield Produce face mask Correct
c) What is the upper bound on the amount Kipling should pay for additional information? $ Correct
Part B
Kipling can pay for a market survey research to better assess future market conditions. There is a 0.6 chance that the survey will produce an encouraging report and a 0.4 chance that the report will be discouraging. Given an encouraging report, the probability of low competition is 0.23 while given a discouraging report, the probability of high competition is 0.43.
a) If the market survey report is encouraging, what is the expected value of the optimal decision?$
b) If the market survey report is discouraging, what is the expected value of the optimal decision?$
c) What is the expected value with the sample information (EVwSI) by the market survey?$
d) What is the expected value of the sample information (EVSI) provided by the market survey?$
e) If the market survey costs $4,100, what is the best course of action for Kipling? Select an answer Don’t use market survey; cost is less than EVPI Use market survey; cost is less than EVPI Use market survey; cost is less than EVSI Don’t use market survey; cost is greater than EVSI
f) What is the efficiency of the sample information? Round % to 1 decimal place. %