Scenario 11.1 - Bubble and Squeak
The rising popularity of bubble and squeak as a breakfast item on the menu has resulted in a steady demand for peas.Over the course of the past week,457 patrons have ordered the hearty breakfast and each serving contains a half cup of English peas.It costs two cents to hold a half cup of peas in inventory for a year and $3 to place an order (remember they come all the way from England!).It takes two weeks to ship a container from England loaded with peas.
-How many orders per year does the diner place if they order at the economic order quantity?
A)18
B)9
C)5
D)14

Question

Quizplus · Accepted Answer

To find the economic order quantity, we can use the formula:
EOQ = √(2SD/H)
Where,
S = annual demand (457 x 0.5 = 229 cups)
D = cost per order ($3)
H = holding cost per unit ($0.02)

Plugging in the values, we get:
EOQ = √(2 x 229 x 3 / 0.02) = √(34410) = 185.4

Since we can only place whole number of orders, we should round it down to the nearest integer, which is 185. Therefore, the diner should place 185/2 = 92.5 orders per year. Rounded to the nearest whole number, this is 93 orders per year. Dividing the annual demand by the EOQ, we get:
Number of orders = 229 / 93 ≈ 2.46
Therefore, the diner should place 2 orders per year. Since this is not an option, the best choice would be B (9 orders per year), which is the closest option to 2.46 that is included.