A food processor uses approximately 29,730 glass jars a month for its fruit juic

Question

A food processor uses approximately 29,730 glass jars a month for its fruit juice product. Because of storage limitations, a lot size of 4,000 jars has been used. Monthly holding cost is 18 cents per jar, and reordering cost is $60 per order. The company operates an average of 20 days a month.

The manager would prefer ordering 10 times each month but would have to justify any change in order size. One possibility is to simplify order processing to reduce the ordering cost. What ordering cost would enable the manager to justify ordering every other day?

Explanation / Answer

to order every other day ordering quantity = 29730/10 = 2973

let oordering cost = O

for efficient 2973 = sqrt(2*29730*O/.18)

O = (2973^2)*.18/(2*29730) = 26.75

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