Please show work. MC Qu. 113 The manager of the Quick Stop Corner Convenience Th

Question

Please show work.

MC Qu. 113 The manager of the Quick Stop Corner Convenience 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 bee contains four six-packs). 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? Mutiple Choice 11 cases 14 cases 32 cases 20 cases 8 cases

Explanation / Answer

Daily demand = 4 cases

Number of days per year = 365 (As it never closes)

Annual demand (D) = Daily demand x 365 days = 4 cases x 365 = 1460 cases.

Ordering cost (S) = $8 per order

Cost per six pack is $0.80 and each case contain four six pack. So cost per case = $0.80 x 4 = $3.2

Daily holding cost = 5% of cost = 5% of $3.2 = $0.16

So annual Holding cost (H) = $0.16 x 365 = $58.4

Economic order quantity = sqrt of (2DS / H)

= sqrt of [(2 x 1460 x 8)/58.4]

= sqrt of 400

= 20

So the answer is 20 cases

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