A special coffeehouse sells colombian coffee at a fairly steady reat of 30 pound

Question

A special coffeehouse sells colombian coffee at a fairly steady reat of 30 pounds per month. The beans are purchased from a local supplier for $3.20 per pound. The coffeehouse estimates that it costs about $60 in paperwork and labor to place an order for the coffee, and the holding costs are based on a 15% annual interest rate.

a) What is the optimal opder quantity for Colombian coffee?

b) If the replenishment lead time in 10.6 months, what is the re-order level based on the on-hand inventory?

c) What is the average annual cost of holding and setup cost due to the optimal order?

Explanation / Answer

holding cost = 0.15* 30*12*1= $54

paperwork = $60

optimal order quantity for Colombian coffee = 30*12+54+60=$474

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.