Kushie\'s Coffee in Bangalore is a quaint establishment nestled near MG Road in

Question

Kushie's Coffee in Bangalore is a quaint establishment nestled near MG Road in the central business district. It serves coffee and fruit cake to a clientele that has been enjoying these products for over fifty years. The demand for coffee beans is 6600 cases per year. It costs $5 per case to order coffee. As coffee is a perishable product, the holding cost is fairly high at $40/case/year. Kushie's is open 300 days a year.

What is their cost for holding all types of inventory if they order optimally?

Question options:

1) $812.4 2) $2012.40 3) $1200 4) $1649.9

Explanation / Answer

1) $812.4

Calculation shown below:

Annual Demand, D = 6600 Ordering cost per case,Co 5 Holding Cost, Ch/case/year 40 Workign days /year 300 Economic ordering Quantity, EOQ = 40.620 Holding cost per annum = 812.4

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