Final answer:
Based on the provided data, Steve should order sea shells about once a month to align with his monthly sales while minimizing reordering and inventory holding costs, making option B the best answer.
Step-by-step explanation:
The question at hand is to determine how often Steve should order sea shells for his shop based on the given cost and sales information. To solve this problem, one would typically use inventory management techniques such as the Economic Order Quantity (EOQ) formula. However, the provided information does not allow us to calculate EOQ directly because we lack the necessary demand rate, holding cost percentage, and order cost inputs. However, by making some assumptions based on the monthly sales data and other given costs, we can approximate the best order frequency.
Steve sells an average of 1000 shells each month, and there is a fixed shipping and handling fee of $20.00 per order. Assuming the unit holding cost of $0.50 per shell per year applies, we estimate holding costs based on the time the inventory is held. Since Steve sells these shells over a month, one could argue that the actual holding cost is significantly less than the annual rate, but for simplicity, we will use the provided rate.
To minimize both the ordering and holding costs, Steve should aim to order just enough shells to prevent stockouts while at the same time avoiding high inventory costs. Without complex calculations, simply looking at the fixed costs and monthly demand suggests that ordering once a month aligns with his average sales, thus minimizing the frequency and cost of reordering and also reducing the risk of excess inventory holding costs and breakage. Therefore, the best answer based on the information provided would be about 1 time each month, which is option B.