Optimal Order Quantity of Coffee
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A specialty coffeehouse sells Colombia coffee at a fairly steady rate of 280 pounds annually. The beans are purchased from local supplier for $2.40 per pound. The coffeehouse estimates that it cost $45 in paperwork and labor to place an order for the coffee, and holding costs are based on a 20% annual interest rate.
a. Determine the optimal order quantity for Colombian coffee
b. What is the time between placement of orders?
c. What is the average annual cost of holding and setup due to this item?
d. If replenishment lead time is three weeks, determine the reorder level based on the on-hand inventory.
e. What possible benefits/problems can you foresee with implementing JIT in the coffeehouse process?
To receive full credit for this assignment you must show assumptions, calculations and answers to all questions.
I am stuck on how exactly to do this problem, is there someone that can help me out with it please?
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Solution Summary
This solution contains step-by-step calculations to determine the optimal order quantity for Colombian coffee and other calculations.
Education
- BE, Bangalore University, India
- MS, University of Wisconsin-Madison
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