A gourmet coffee shop in downtown SF is open 250 days a year and sells an average of 80 pounds of Kona Coffee beans a day. it purchase coffee beans for $20.00 per pound.

ordering (fixed cost = $16 per order), beans are always shipped from Hawaii within exactly 2 days.
Per-pound annual holding costs for the beans are $3.

a) What is the economic order quantity (EOQ) for Kona coffee beans? (400)
quantity (EOQ) = sqrt(2DS/H) = sqrt(2*20000*80*16/3)= 400 pounds

b) What are the total annual holding costs of cycle stock for Kona coffee beans? ($600)
total annual holding costs = h × Q/2 = 3*400/2= $600

2288

To calculate the economic order quantity (EOQ), which is the optimal quantity to order, you can use the formula:

EOQ = sqrt(2DS/H)

Where:
D = Annual demand (number of pounds sold per year)
S = Ordering cost per order
H = Holding cost per unit per year

Given that the coffee shop is open 250 days a year and sells an average of 80 pounds of Kona Coffee beans per day, the annual demand (D) would be:

D = 80 pounds/day * 250 days/year = 20,000 pounds/year

The ordering cost (S) is $16 per order, and the holding cost (H) is $3 per pound per year.

Now, plugging these values into the EOQ formula:

EOQ = sqrt(2 * 20,000 * 16 / 3) ≈ 400 pounds

Therefore, the economic order quantity (EOQ) for Kona coffee beans is approximately 400 pounds.

To calculate the total annual holding costs of cycle stock for Kona coffee beans, you can use the formula:

Total annual holding costs = H × Q/2

Where Q is the economic order quantity (EOQ) calculated previously, and H is the holding cost per unit per year.

Given that the holding cost (H) is $3 per pound per year and the EOQ (Q) is 400 pounds:

Total annual holding costs = 3 * 400/2 = $600

Therefore, the total annual holding costs of cycle stock for Kona coffee beans would be $600.

c) What are the total annual ordering costs for Kona coffee beans? ($32)

total annual ordering costs = (D/Q) × S = (20000/400) × 16 = $32

d) What is the total annual cost of carrying and ordering Kona coffee beans? ($632)
total annual cost = total annual holding costs + total annual ordering costs = $600 + $32 = $632.