The Rainwater Brewery produces Rainwater Light Beer, which it stores in barrels in its warehouse and supplies

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The Rainwater Brewery produces Rainwater Light Beer, which it stores in barrels in its warehouse and supplies to its distributors on demand. The demand for Rainwater is 1,500 barrels of beer per day (365 days per year). The brewery can produce 2,000 barrels of Rainwater per day. It costs $6,500 to set up a production run for Rainwater. Once it is brewed, the beer is stored in a refrigerated warehouse at an annual cost of $50 per barrel. Determine the economic order quantity and the minimum total annual inventory cost.

Economic Order Quantity
Economic order quantity (EOQ) is the ideal order quantity a company should purchase to minimize inventory costs such as holding costs, shortage costs, and order costs. This production-scheduling model was developed in 1913 by Ford W. Harris and has...
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