Millennium Liquors is a wholesaler of sparkling wines. Its most popular product is the French Bete Noire, which is shipped directly from Fra

Question

Millennium Liquors is a wholesaler of sparkling wines. Its most popular product is the French Bete Noire, which is shipped directly from France. Weekly demand is 50 cases. Millennium purchases each case for $110, there is a $350 fixed cost for each order (independent of the quantity ordered), and its annual holding cost is 25 percent.

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Aaliyah 3 months 2021-10-24T14:50:48+00:00 1 Answer 0 views 0

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    2021-10-24T14:51:52+00:00

    Answer:

    economic order quantity is 258 cases per purchase

    Step-by-step explanation:

    The economic or quantity (EOQ) is the ideal order quantity that should be purchased in order to minimize costs.

    Q = √(2DS / H)

    • D = annual demand in units
    • S = order cost per purchase order
    • H = holding cost per unit, per year

    D = 50 cases x 52 weeks = 2,600 cases per year

    S = $350 per purchase order

    H = $110 x 25% = $27.50

    Q = √[(2 x 2,600 x 350) / 27.50] = √(1,820,000 / 27.5) = √66,181.82 = 257.26 cases ≈ 258 cases

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