Question

Joe needs to purchase malt for his micro-brew production. His supplier charges $35 per delivery (no matter how much is delivered) and $1.20 per gallon. Joe's annual holding cost per unit is 35% of the dollar value of the unit. Joe uses 5000 gallons of malt per week. Suppose Joe were to order 3800 gallons each time he orders. How many orders per year would he place on average? A. 68.42 OB. 46.82 OC. 24.86 OD. 84.26

Answer 1

1. A. 68.42

No. of orders = demand / order quantity

Annual demand = 5000 per week or 260000 annually(5000 * 52 weeks)

Order quantity = 3800

Number of orders = 260000 / 3800 = 68.42(approx)