Question

Dream Vacation company specializes in virtual holidays. Its business have been booming since last summer. When booking a trip its clients receive a package over the mail that enhances their experience such as fragrances: ocean, mountain... along with packages of exotic food associated with the countries visited. The company deals with various distributors and is asking you to figure out its optimal order quantity. It wishes to focus first on the fragrance orders. Dream Holidays expects its sales over the next year to be 600,000 trips. For each booking they offer an average of two (2) bottles of fragrance. They sell the product $7 per bottle. The holding cost is $10.00 per packages that contains a dozen bottles. The wholesale cost is 40% of the sales price. The order cost is $60 per order and the company has a yearly opportunity cost of 2%.

A) What is the EOQ for this product

B) Assuming a 360 day work per year, how many orders should be processed per year?

Answer 1