A local distributor for a Belgian chocolate manufacturer expects to sell 12,000 cases of chocolate truffles next year.The annual holding costs for the truffles are $16 per case per year.The ordering cost is $60 per order.The distributor operates 320 days a year.Then ______.
A)there will be three orders per month
B)there will be 40 orders per year
C)there will be one order every week
D)there will be two orders every month

Question

Quizplus · Accepted Answer

To determine the order quantity, we need to use the economic order quantity (EOQ) formula: 
EOQ = sqrt(2DS/H), where 
D = annual demand = 12,000 cases 
S = ordering cost per order = $60 
H = annual holding cost per unit = $16

Plugging in the values, we get EOQ = 200.

Since the distributor operates 320 days a year, they can order 200/12 = 16.67 (approx. 17) times a month.

Therefore, the total number of orders per year would be 17 * 320 = 5,440 which is closest to answer B (40 orders per year).

A Local Distributor for a Belgian Chocolate Manufacturer Expects to Sell