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Answer :
Final answer:
The total annual cost of ordering and holding inventory for the wine shop, considering it purchases 6 cases per order of a speciality wine, is $2430. This includes $2100 in ordering costs and $330 in holding costs.
Explanation:
The wine shop purchases 210 bottles speciality wine per month, or 2520 bottles per year. Each order contains 6 cases, or 300 bottles. Consequently, the wine shop needs to place approximately 8.4 orders (2520/300) per year. Each order costs $250, leading to an annual ordering cost of $2100 (8.4 * $250).
Next, we calculate the annual holding cost: With 40% as the annual holding cost percentage, and a cost of $5.5 per bottle, the average inventory held is half the order size (6 cases / 2 equals 150 bottles). This leads to an annual holding cost of $330 ((150 * $5.5) * 40%).
Therefore, the total annual cost of ordering and holding inventory for the wine shop is $2430 ($2100 in ordering costs + $330 in holding costs).
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