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 (each case has 24 ten-pound bags). It would be disastrous for them to run out of coffee, so they keep a safety stock of 30 cases. The cases cost $4800 and it costs $5 per case to order coffee. As coffee is a perishable product, the holding cost is fairly high at $40/case/year. The lead time to receive an order is seven days. Kushie's is open 300 days a year.
-How many orders per year do they place if they order at double their EOQ quantity?
A) 40.6
B) 81.2
C) 162.5
D) 325

Question

Quizplus · Accepted Answer

First, calculate the EOQ (Economic Order Quantity) using the formula:

EOQ = √((2DS)/H)

Where:
D = Annual demand = 6600 cases
S = Cost per order = $5 x 24 = $120
H = Holding cost per unit per year = $40

Plugging in the values, we get:
EOQ = √((2 x 6600 x 120)/40) = √(158400) = 398 cases

Now, double the EOQ to get the order quantity:
Order Quantity = 2 x EOQ = 2 x 398 = 796 cases

To calculate the number of orders per year, we need to divide the total annual demand by the order quantity:

Number of orders per year = Annual demand / Order Quantity
= 6600 / 796 = 8.29

However, since we can only place whole orders, we need to round up to the nearest integer, which gives us:

Number of orders per year = 9 x 2 = 18 (since we are ordering double the EOQ quantity)

Therefore, the correct answer is B) 81.2 orders.

Kushie's Coffee in Bangalore Is a Quaint Establishment Nestled near MG