Introduction to Management Science 12th Edition by Bernard Taylor

Exercise 30

The Rainwater Brewery produces Rainwater Light Beer, which it stores in barrels in its warehouse and supplies to its distributors on demand. The demand for Rainwater is 1,500 barrels of beer per day (365 days per year). The brewery can produce 2,000 barrels of Rainwater per day. It costs $6,500 to set up a production run for Rainwater. Once it is brewed, the beer is stored in a refrigerated warehouse at an annual cost of $50 per barrel. Determine the economic order quantity and the minimum total annual inventory cost.