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 $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?

Answer 1

20 Cases

Step-by-step 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.