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 cost $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? a. 14 b. 11 c. 20 d. 8

Answer 1

Answer:

C. 20

Explanation:

Economic Order Quantity= $\sqrt{\frac{2DS}{H}}$

Where:

• D=Demand
• S=Cost Per Order($)
• I=Holding Cost(%)
• C=Cost Per Unit($)
• H,Holding cost = I X C

From the given problem:

Demand, D=4 Cases

Cost Per Order, S=$8

Holding Cost(%),I=5%

Cost Per Unit($), C=$3.20

H,Holding cost = I X C =0.05*3.20=$0.16

Therefore:

$E.O.Q=\sqrt{\frac{2*4*8}{0.16}}\\ =\sqrt{400}\\=20$

Answer 2

The economic order quantity (EOQ) for Stein beer is: c. 20

The formular for economic order quantity is given as ;

Economic Order Quantity (EOQ) = $\sqrt{2 DS/H$

Where:

D = Demand = 4 Cases

S = Cost Per Order($) = $8

I = Holding Cost(%) = 5%

C = Cost Per Unit($) = $3.20

H,Holding cost = I X C = 0.05*3.20 = $0.16

Hence,

EOQ = $\sqrt{2 * 4 * 8 / 0.16$

EOQ = $\sqrt{400$

EOQ = 20

∴ EOQ (Economic Order Quantity) = 20 units

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