How many pounds should groundz order at time

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Reference no: EM131134639

Groundz Coffee Shop uses 4 pounds of a specialty tea weekly; each pound costs $16. Carryingcosts are $0.25 per pound. It costs the firm $8 to prepare an order. Assume the basic EOQ modelwith no shortages applies. Assume 52 weeks per year.

a. How many pounds should Groundz order at a time?

b. What is total annual cost (excluding item cost) of managing this item on a cost-minimizingbasis?

c. What is the annual ordering cost? Annual holding cost? Why are they equal?

d. The current practice is to order for two weeks of demand (8pounds). Which cost will go up andwhich cost will go down and why?

Reference no: EM131134639

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