Manufactures and distributes cheese-coated pretzels

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Reference no: EM13964027

The pretzel corporation manufactures and distributes cheese-coated pretzels. They purchase their cheese, which come from a specific supplier in 10 kg packages, in batches of 500 kg (i.e. they currently order in lots of 50 packages at a time). This amounts to approximately an order every month, since annual demand is 600 packages. Each package costs pretzel $7, and they estimate that holding a package in inventory costs $1.75 per year. Further, they have studied their ordering process and estimate that it costs them $35 to place an order. They have been told that if they find the optimal order quantity, they could save money on annual ordering plus holding costs. the Pretzel company would like to know how much they would save per year in ordering plus holding costs if they used the EOQ rather than their current order quantity of 50 packages at a time.

Reference no: EM13964027

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