Question: A gourmet coffee shop in downtown San Francisco is open 200 days a year and sells an average of 75 pounds of Kona coffee beans a day. (Demand can be assumed to be distributed normally with a standard deviation of 13 pounds per day). After ordering (fixed cost = $14 per order), beans are always delivered from Hawaii in exactly 4 days. Per-pound annual holding costs for the beans are $4. Refer to the standard normal table for z-values.
a) What is the economic order quantity? (EOQ) for Kona coffee beans 325 pounds (round your response to the nearest whole number).
b) What are the total annual holding costs of stock for Kona coffee beans?$_____ (round your response to two decimal? places).
c) What are the total annual ordering costs for Kona coffee beans?
d) Assume that management has specified that no more than a 11% risk of stockout during lead time is acceptable. What should the reorder point (ROP) be?
e) What is the safety stock needed to attain a 11% risk of stockout during lead time?
f) What is the annual holding cost of maintaining the level of safety stock needed to support a 11% risk?