Question: Question 1: PBK is a campus coffee store that uses EOQ to manage its inventory of whole bean coffee, the demand for which is known

Question 1: PBK is a campus coffee store that uses EOQ to manage its inventory of whole bean coffee, the demand for which is known to be a constant 1,440 pounds/year. PBK's fixed cost associated with placing and receiving an order from its supplier is $18/order. Its purchase cost is $1/pound, and its estimated (unit) annual holding cost is $3.60 /pound/year (per pound per year).

If the actual (unit) annual holding cost is really $6.40/pound/year and PBK could estimate it accurately (i.e., PBK knew the actual cost when making decision on order quantity), what is the minimal Annual Inventory Cost?

$621

$587

$576

$600

$569

$432

Question 2: PBK is a campus coffee store that uses EOQ to manage its inventory of whole bean coffee, the demand for which is known to be a constant 1,440 pounds/year. PBK's fixed cost associated with placing and receiving an order from its supplier is $18/order. Its purchase cost is $1/pound, and its estimated (unit) annual holding cost is $3.60 /pound/year (per pound per year).

Suppose PBK's current policy is to order every 2 months (i.e., the order interval/cycle is 2 months) (1 year has 12 months). What is the annual inventory cost?

620

567

540

576

600

430

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