Question

Millennium Liquors is a wholesaler of sparkling wines. Their most popular product is the French Bete Noire which is shipped directly from France. Weekly demand is for 50 cases. Millennium purchases each case for $115, there is a $325 fixed cost for each order (independent of the quantity ordered) and their annual holding cost is 20 percent What order quantity minimizes Millennium's annual ordering and holding costs?

a. cases If Millennium chooses to order 250 cases each time, what is the sum of their annual ordering and holding costs?
b. Round your answer to 2 decimal places.) If Millennium chooses to order 125 cases each time, what is the sum of the ordering and holding costs incurred by each case sold?
c. per case If Millennium is restricted to order in multiples of 50 cases (e.g., 50, 100, 150, holding costs? Millennium is offered a 5.00% discount if they purchase at least 1,000 cases. annual ordering and holding costs?
d. etc.) how many cases should they order to minimize their annual ordering and cases
e. If they decide to take advantage of this discount, what is the sum of their

Answer 1

To minimize Millennium's annual ordering and holding costs, the order quantity should be approximately 166.67 cases.

Step-by-step explanation:

To determine the order quantity that minimizes Millennium's annual ordering and holding costs, we can use the economic order quantity (EOQ) formula.

The EOQ formula is given by:

EOQ = √((2DS) / H)

where:

• D is the annual demand
• S is the cost per order
• H is the holding cost per unit per year

In this case, the annual demand is 50 cases, the cost per order is $325, and the holding cost is 20% of the purchase cost. Plugging in these values, we get:

EOQ = √((2*50*325) / (0.2*115)) ≈ 166.67 cases

Therefore, the order quantity that minimizes Millennium's annual ordering and holding costs is approximately 166.67 cases.