refer to the following:
The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of beer each day. Ordering costs are $8 per order, and beer costs $0.80 per six-pack (each case of beer contains four six-packs). Orders arrive three days from the time they are placed. Daily holding costs are equal to 5% of the cost of the beer.
-At what point should the manager reorder?
A)0 cases remaining
B)4 cases remaining
C)12 cases remaining
D)16 cases remaining
E)20 cases remaining

Question

refer to the following:
The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of beer each day. Ordering costs are $8 per order, and beer costs $0.80 per six-pack (each case of beer contains four six-packs). Orders arrive three days from the time they are placed. Daily holding costs are equal to 5% of the cost of the beer.
-At what point should the manager reorder?
A)0 cases remaining 
B)4 cases remaining 
C)12 cases remaining 
D)16 cases remaining 
E)20 cases remaining

Quizplus · Accepted Answer

The economic order quantity (EOQ) formula can be used to determine the optimal order quantity, which minimizes the total cost of ordering and holding beer inventory. The formula is:
EOQ = sqrt(2DS/H)
where D = daily demand (4 cases), S = ordering cost ($8), H = holding cost (5% of beer cost per day), and sqrt = square root.

Using the given values, we can calculate:
EOQ = sqrt(2 x 4 x $8 / 0.05 x $0.80 x 24) = 12 cases

Therefore, the manager should reorder when there are 12 cases remaining to minimize total cost.

Refer to the Following