Economic order quantity, Ben would like to use an inventory

Economic order quantity

Reference no: EM13126731

Gentle Ben's Bar and Restaurant uses 5,000 quart bottles of an imported wine each year. The effervescent wine costs $3 per bottle and is served in whole bottles only since it loses its bubbles quickly. Ben figures that it costs $10 each time an order is placed, and holding costs are 20 percent of the purchase price. It takes three weeks for an order to arrive. Weekly demand is 100 bottles (closed two weeks a year) with a standard deviation of 30 bottles.

Ben would like to use an inventory system that minimizes inventory cost and will satisfy 95 percent of his customers who order this wine.

a. What is the economic order quantity for Ben to order?

b. At what inventory level should he place an order.

Reference no: EM13126731

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