Answer :
(a) The optimum number of bottles per order is 104. (b) The wine should be ordered 9 times a year.
Optimum number of bottles per order: The Economic Order Quantity (EOQ) model is a widely used inventory management tool. EOQ finds the most economic order quantity of inventory with minimal holding costs and order costs. In the given problem, annual demand is 922 bottles and the ordering cost is $10. Holding cost is $3 per bottle per year. Therefore, the optimum number of bottles per order is given by EOQ = sqrt((2DS)/(H))where D is annual demand, S is ordering cost, and H is holding cost per unit. EOQ = sqrt((2*922*10)/3)= 104 bottles So, the optimum number of bottles per order is 104 bottles.(b) Number of times wine should be ordered: Reorder point is the inventory level at which a company orders more stock. In the EOQ model, the reorder point is calculated as R = D/Q, where D is annual demand and Q is the optimal order quantity calculated by EOQ.R = D/Q = 922/104 = 8.86Since reorder point cannot be a fraction of a bottle, 9 orders should be placed in a year. The answer is as follows. (a) The optimum number of bottles per order is 104(b) The wine should be ordered 9 times a year. Therefore, the answers are: (a) The optimum number of bottles per order is 104. (b) The wine should be ordered 9 times a year.
The Economic Order Quantity (EOQ) model helps to find the optimum number of bottles per order and the number of times wine should be ordered.
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