A specialty coffee house sells Colombian coffee at a steady rate of 3600 pounds annually. The beans are purchased from a local supplier for $5.33 per pound. The coffee house estimates that it costs them $120 in paperwork and labor to place an order for the coffee. Holding costs are based on a 20% annual rate.
Suppose the coffee from the above problem has a shelf life of 1 month.
a. How often should orders be placed?
b. What quantity should be ordered?
c. How much would this coffee house be willing to pay for a vacuum freezer that would store the coffee for up to 3 months?
d. How about 6 months?
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