(Answered) Groundz coffee shop uses 4 pounds of a specialty tea weekly

Management Studies

Groundz Coffee Shop uses 4 pounds of a specialty tea weekly; each pound costs $16. Carrying costs are $1 per pound per week because space is very scarce. It costs the firm $8 to prepare an order. Assume the basic EOQ model with no shortages applies. Assume 52 weeks per year, closed on Mondays.

a. How many pounds should Groundz order at a time?

b. What is total annual cost (excluding item cost) of managing this item on a cost-minimizing basis?

c. In pursuing lowest annual total cost, how many orders should Groundz place annually?

d. How many days will there be between orders (assume 312 operating days) if Groundz practices EOQ behavior?

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