Question

A gourmet coffee shop in downtown San Francisco is open 200 days a year and sells an average of 75 pounds of Kona coffee beans a day.​ (Demand can be assumed to be distributed normally with a standard deviation of 16 pounds per​ day). After ordering​ (fixed cost​ = ​$14 per​ order), beans are always delivered from Hawaii in exactly 4 days.​ Per-pound annual holding costs for the beans are ​$3. Refer to the standard normal tableLOADING... for​ z-values. ​a) What is the economic order quantity​ (EOQ) for Kona coffee​ beans? 374 pounds ​(round your response to the nearest whole​ number). ​b) What are the total annual holding costs of stock for Kona coffee​ beans? ​$ 561 ​(round your response to two decimal​ places). ​c) What are the total annual ordering costs for Kona coffee​ beans? ​$ nothing ​(round your response to two decimal​ places)

Answer 1

The continuous endeavor of the companies is to reduce inventory costs. For this, the companies use Economic order quantity. When they order economic order quantity from the vendor then they enjoy minimized annual inventory cost.