A specialty coffeehouse sells Columbian coffee for $7 per pound at a fairly steady rate of 320 pounds annually. The beans are purchased from a local supplier for $1.80 per pound. The coffeehouse estimates that it costs $30 in paperwork and labor to place an order for the coffee, and holding costs are based on a 12 percent 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 setup and inventory holding due to this item?

A specialty coffeehouse sells Columbian coffee for $7 per pound at a fairly steady rate of 320 pounds annually. The beans are purchased from a local supplier for $1.80 per pound. The coffeehouse estimates that it costs $30 in paperwork and labor to place an order for the coffee, and holding costs are based on a 12 percent 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 setup and inventory holding due to this item?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

A specialty coffeehouse sells Columbian coffee for
$7 per pound at a fairly steady rate of 320 pounds
annually. The beans are purchased from a local
supplier for $1.80 per pound. The coffeehouse
estimates that it costs $30 in paperwork and labor
to place an order for the coffee, and holding costs
are based on a 12 percent 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 setup and
inventory holding due to this item?

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