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Guemmer Specialty Foods can produce their famous cherry pies at a rate of 1650 cases per day (this is the daily production rate). The firm distributes the pies to regional stores and restaurants at a steady rate of 250 cases per day (this is the daily demand rate). The cost of each production setup is $320. Annual holding costs are $11.50 per case per year. Annual demand is 62,500 cases. Assume 250 working days per year. Assume the POQ (Production Order Quantity) model is used by Guemmer Specialty Foods.
What is approximate annual inventory holding cost (rounded to the nearest dollar)?
$320
$1,000
$9,878
$12.00
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