Constraint will significantly impact our annual ordering

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A local Peet's coffee shop consumes various supplies in its daily operation. For one of its high-end Colombian coffees, it consumes 10 pounds per week. The store operates 52 weeks out of the year. The beans are purchased from a local supplier for $6 per pound. The store manager estimates that it costs about $15 in labor and paperwork to place each replenishment order and to receive it, inspect it, and put it away. Inventory holding costs are 24% per year.

"The supplier can only sell us this coffee in sacks of 40 pounds. "

True/False: By limiting our purchase to multiples of 40 pounds, this constraint will significantly impact our annual ordering and holding costs to the point where we should seek alternate suppliers.

Reference no: EM132297333

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