The Olde Town Microbrewery makes Townside beer,which it bottles and sells in its adjoining restaurant and bythe case. It costs $1700 to set up, brew, and bottle a batchof the beer. The annual cost to store the beer in inventory is$1.25 per bottle. The annual demand for the beer is 21,000bottles and the brewery has the capacity to produce 30,000bottles annually. a. Determine the optimal order quantity, total annual inven-tory cost, the number of production runs per year, and the maximum inventory level.b. If the microbrewery has only enough storage space tohold a maximum of 2500 bottles of beer in inventory,how will that affect total inventory costs?
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
The Olde Town Microbrewery makes Townside beer,
which it bottles and sells in its adjoining restaurant and by
the case. It costs $1700 to set up, brew, and bottle a batch
of the beer. The annual cost to store the beer in inventory is
$1.25 per bottle. The annual demand for the beer is 21,000
bottles and the brewery has the capacity to produce 30,000
bottles annually.
a. Determine the optimal order quantity, total annual inven-
tory cost, the number of production runs per year, and
the maximum inventory level.
b. If the microbrewery has only enough storage space to
hold a maximum of 2500 bottles of beer in inventory,
how will that affect total inventory costs?
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