Spring Water

The demand for coconut water at SLC WalMart is 600 gallons per week. The setup cost for placing an order to replenish inventory is $25. Coconut water loses its freshness when stored, and SLC Walmart incurs an annual holding cost of $2.6/gallon. Assume that there are 52 weeks a year.
Determine SLC WalMart’s Economic Order Quantity in [gallons].

Question

Spring Water

The demand for coconut water at SLC WalMart is 600 gallons per week. The setup cost for placing an order to replenish inventory is $25. Coconut water loses its freshness when stored, and SLC Walmart incurs an annual holding cost of $2.6/gallon. Assume that there are 52 weeks a year.
Determine SLC WalMart’s Economic Order Quantity in [gallons].

BlackTom AI · Accepted Answer

The problem asks for the Economic Order Quantity (EOQ) for coconut water.
First, rest the given data: annual demand D, setup cost K, and annual holding cost per unit h. Here, weekly demand is 600 gallons, and there are 52 weeks in a year, so annual demand D = 600 × 52 = 31,200 gallons.
The setup cost for placing an order is K = $25, and the annual holding cost per gallon is h = $2.6.
The EOQ formula is EOQ = sqrt(2KD / h). This formula balances ordering costs with holding costs to minimize total costs.
Plug in the numbers: EOQ = sqrt(2 × 25 × 31,200 / 2.6).
Calculate the numerator: 2 × 25 × 31,200 = 50 × 31,200 = 1,560,000.
Divide by the holding cost: 1,560,000 / 2.6 = 600,000.
Take the square root: sqrt(600,000) ≈ 774.5967.
Therefore, the Economic Order Quantity is approximately 774.5967 gallons.
Note: The problem statement does not provide alternative answer choices to compare against, but the computed EOQ aligns with the standard EOQ formula and the given cost parameters.

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