The Shotz Brewery produces an ale, which it stores in barrels in its warehouse and supplies to

Question:

The Shotz Brewery produces an ale, which it stores in barrels in its warehouse and supplies to its distributors on demand. The demand for ale is 1800 barrels per day. The brewery can produce 3000 barrels per day. It costs $7500 to set up a production run for ale. Once it is brewed, the ale is stored in a refrigerated warehouse at an annual cost of $60 per barrel. Determine the 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...