A beer distributor finds that it sells on average 100 cases a week of regular 12-oz. Budweiser. For this problem assume that demand occurs at a constant rate over a 50 week year. The distributor currently purchases beer every two weeks at a cost of $6 per case. The inventory-related holding cost (capital, insurance, etc.) for the distributor equals 34 percent of the dollar value of inventory per year. Each order placed with the supplier costs the distributor $10. This cost includes labor, forms, postage, and so forth.

What are the distributors inventory turns per year?

What is the inventory-related cost per case of beer sold?

Assume the brewer is willing to give a 3 percent quantity discount if the distributor orders 650 cases or more at a time. If the distributor is interested in minimizing its total cost (i.e., purchase and inventory-related costs), should the distributor begin ordering 650 or more cases at a time?

What are the savings and how many units should be ordered at a time?