The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day. Order costs are $8.00 per order, and Stein beer costs $3.20 per case. Orders arrive three days from the time they are placed. Daily holding costs are equal to 5 percent of the cost of the beer. What is the economic order quantity for Stein beer?

Question

Quinton Graham

Business

31 January, 01:28

The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day. Order costs are $8.00 per order, and Stein beer costs $3.20 per case. Orders arrive three days from the time they are placed. Daily holding costs are equal to 5 percent of the cost of the beer. What is the economic order quantity for Stein beer?

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Answers (1)

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Kailyn Huff · Answer 1

20 Cases

Explanation:

Economic order quantity which is also known as (EOQ) can be defined as the order quantity a company or an organisation should tend to purchase or buy in order to minimize their inventory costs.

Example of this inventory costs are:

Holding costs

Shortage costs

Order costs.

Calculation for the economic order quantity for Stein beer will be:

Numbers of cases * Numbers of days

4 cases * 5 days

= 20 cases

Therefore the economic order quantity for Stein beer will be: 20 cases every five days because the Orders often arrived three days from the time they are placed.