Reference no: EM133159557

Question - The West Bean Roaster in Vancouver operates 200 days a year. She sells several kinds of coffee, but her regular customers often prefer Kona coffee. West Bean uses an average of 75 pounds of Kona coffee beans per day (with a standard deviation of 15 pounds per day). Assume demand for the Kona follows a normal distribution. After placing an order (which costs them $16), the beans are delivered to them directly from Hawaii in 4 days. The annual storage cost is $3 per book.

Include details of your calculations. An answer without details is worth zero points.

1. Calculate the economic order quantity (EOQ) for West Bean.

2. Calculate the annual cost of warehousing + the annual cost of orders if they use economic order quantity (EOQ).

Now suppose that West Bean management wants to maintain a service level of 99%.

3. What should be the safety stock and reorder point and the additional storage cost of safety stock?