Question

Koshys coffe in bagalore is quaint establishment nesteld near mg road in the central business distirct it serves coffee and fruit cake to a clientel that has been enjoying these products for over fifty years the demand for coffee beans is 6600 cases per year each case has 24 ten pound bags it would be distraus fro them to run out of coffe so tye keep a safety stock of 30 cases the cases cost 4800 and it costs 5 per case to order coffee. as coffee is perishable prudct the holding ocst is fairly hight 40/case/year the lead time to recive an order is seven days koshys is open 300 days a year.
What is their annual ordering cost if they order at their EOQ level?

Answer 1

Answer:

812.41

Explanation:

Demand D = 6600 cases

Ordering cost S = 5

Holding cost H= $40

Economic order quantity = EOQ

Q = $\sqrt{2DS/H}$

Q = $\sqrt{(2*6600*5)/40}$

Q = $\sqrt{1650}$

Q = 40.620192

Q = 40.62 cases

Annual ordering cost = D * S / EDQ

Annual ordering cost = 6600 * 5 / 40.62

Annual ordering cost = 33000 / 40.62

Annual ordering cost = 812.4076809453471

Annual ordering cost = $812.41

So, their annual ordering cost if they order at their EOQ level is 812.41