The manager of the Quick Stop Corner convenience store (which is open 360 days per year) sells four cases of Stein soda each day (1440 cases per year). Order costs are $8.00 per order. The lead time for an order is three days. Annual holding costs are equal to $57.60 per case.
-What is the optimal order quantity for Stein soda?
A) 8 cases
B) 12 cases
C) 20 cases
D) 16 cases

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is used to determine the optimal order quantity. EOQ = sqrt((2 * Demand * Order Cost) / Holding Cost). Here, Demand = 1440 cases/year, Order Cost = $8, and Holding Cost = $57.60. Plugging these values into the EOQ formula gives EOQ = sqrt((2 * 1440 * 8) / 57.6) = 20 cases.

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