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?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.6P

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