Coffee Hut is looking to purchase coffee beans from one supplier, Blue Ridge Coffee (BRC), and tea from another, Greyson Italian Imports (GII). The following two products have the various attributes:

	Blue Rich Coffee	Greyson Italian Imports
Unit Cost ($)	360	550
Fixed Order Costs ($)	70	85
Avg Weekly Demand	40	28

The fixed order cost represents the transportation and administrative cost of each order. Assume 50 weeks in a year and an interest rate of 12%.

a. Under the existing arrangement with separate suppliers, calculate the economic order quantities and average annual cost for each product.

b. GII is offering to supply Coffee Hut at a unit cost of $420 with a combined fixed order cost of $100 if Coffee Hut jointly orders its coffee and tea from them exclusively, dropping all business with BRC. Should Coffee Hut accept this offer?

c. The lead time is one week (for either supplier). What is the reorder point for each of the products based on the recommendation that you gave in Part B? What is the average pipeline inventory for each product? Plot the cycle and pipeline stock for combined products(no need to separate the demand and ordering) over at least two cycles.

Answer rating: 100% (QA)

Certainly lets break down each part of the problem Part a 1 Economic Order Quantity EOQ Calculation ... View the full answer