Question

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 $.80 per six-pack (each case of Stein beer contains four six-packs). Orders arrive three days from the time they are placed. Daily holding costs are equal to five percent of the cost of the beer.

1. At what point should he reorder Stein beer?
A. 0 cases remaining
B. 4 cases remaining
C. 12 cases remaining
D. 16 cases remaining
E. 20 cases remaining

Answer 1

C. 12 cases remaining

Step-by-step explanation:

The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day.

Orders arrive three days from the time they are placed.

Thus, the shop has 3 days of merchandise in transit:

4 cases x 3 days in-transit: 12 cases

When there is 12 cases remaining It should do the order. This will make the order arrive exactly when the inventory drops to zero according to a just in time policy.