question archive The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day
The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day
Subject:ManagementPrice:2.87 Bought7
The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day. Order costs are $8.00 per order, and Stein beer costs $.80 per six-pack (each case of Stein beer contains four six-packs). Orders arrive three days from the time they are placed. Daily holding costs are equal to 5 percent of the cost of the beer. What is the economic order quantity for Stein beer?
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Answer
Economic order quantity ( EOQ)
= Square root ( 2 X F X D/C)
F = Fixed ordering cost = $8 /order
D = Annual demand = 4 cases /day x 365 = 1460
C = Inventory holding cost per case
= Annual holding rate as percentage of cost x cost per pack
= 0.05 (5% per day) x 365 (days/year) x $0.8 /six-pack x 4 six-packs/case
= 0.05 x365 x 3.2 = $58,4
Therefore EOQ
= Square root ( 2 x 8 x 1460 /0.16/58.4 ) = Square root (400) = 20
