# solution

One of the products stocked by a Samâ€™s Club store is Samâ€™s Cola, which is sold in cases. The demand level for Samâ€™s Cola is highly seasonal:

â€¢ During the slow season, the demand rate is approximately 650 cases a month, which is the same as a yearly demand rate of 650*12 = 7,800 cases.

â€¢ During the busy season, the demand rate is approximately 1,300 cases a month, or 15,600 cases a year.

â€¢ The cost to place an order is \$5, and the yearly holding cost for a case of Sims Cola is \$12.

a. (**) According to the EOQ formula, how many cases of Samâ€™s Cola should be ordered at a time during the slow season? How many cases of Samâ€™s Cola should be ordered during the busy season?

b. (**) Suppose Samâ€™s Club decides to use the same order quantity, Q = 150, throughout the year. Calculate total holding and ordering costs for the year. Do not consider safety stock in your calculations. (Annual demand can be calculated as an average of the slow and busy rates given above.)

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