Joe Birra need to purchase malt for his micro-brew production. His supplier charges $30 per delivery (no matter how much is delivered) and $1 per gallon. Joe’s annual holding cost is 30% of the price per gallon. Joe uses 200 gallons of malt per week.
a. Suppose Joe orders 1000 gallons each time. What is his average inventory? _____ gallons
b. Suppose Joe orders 2000 gallons each time, How many orders does he place with supplier each year? _____ orders
c. How many gallons should Joe order from his supplier with each order to minimize the sum of ordering and holding costs_____ gallons
d. Suppose Joe orders 2750 gallons each time he places an order with the supplier. What is the sum of ordering and holding costs per gallon $ ____/per gallon?
e. Suppose Joe orders the quantity from part © that minimizes the sum of the ordering and holding costs each time he places an order with the supplier, What is the annual cost of the EOQ expressed as a percentage of the annual purchase cost?
f. If Joe’s supplier only accepts orders that are an integer multiple of 1,000 gallons, how much should Joe order to minimize ordering and holding costs per gallon? ______ gallons g. Joe’s supplier offers a 3% discount if Joe is willing to purchase 8000 gallons of more. What would Joe’s total annual cost (purchasing , ordering and holding ) be if he were to take advantage of the discount _____?