• A beer distributor finds that it sells on average 100 cases a week of regular 12-oz. Budweiser. The demand occurs at a constant rate over a 50-week year.
• The distributor currently purchases beer every two weeks at a cost of $8 per case. The inventory-related holding cost for the distributor equals 30 percent of the dollar value of inventory per year. Each order placed with the supplier costs the distributor $10.
1. What order quantity minimizes the distributor’s total inventory-related costs (holding and ordering)?
2. Assume the supplier is willing to give a 5 percent quantity discount if the distributor orders 600 cases at a time. Should the distributor accepts the supplier’s offer?