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?

a. Q* = = 8. Groundz should order 8 pounds per order.

b. TC = ($8 ) + ($1 ) (52 ) = $208 + $208 = $416. The firm will spend $416 annually.

c. N = = 26. Groundz should order 26 times per year.
d. Days between orders will be 312/26 or approximately every 12 working days.