A restaurant has an annual demand for 925 bottles of California wine. It costs four dollars to store one bottle for one year and it cost six dollars to place a reorder. find the optimum number of bottles per order.
To find the optimum number of bottles per order, we can use the Economic Order Quantity (EOQ) formula:
EOQ = sqrt((2DS)/H)
Where:
D = annual demand (925 bottles)
S = ordering cost per order ($6)
H = holding cost per year per unit ($4)
Plugging in the values:
EOQ = sqrt((2*925*6)/4)
EOQ = sqrt(5550)
EOQ = 74.49
Therefore, the optimum number of bottles per order is 74. This means that the restaurant should place an order for 74 bottles of California wine to minimize the total ordering and holding costs.