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.

Answer 1

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