1. You need to order material to make the beer. Calculate the Annual Holding Costs for 100 sacks of Grain A and 200 sacks of Grain B if they cost $50/sack and you have to put that on a charge card that charges you 12% apy. Assume that 100 and 200 sacks of grain are what you go through amonth. (So the average quantity on hand is 50 sacks of Grain A and 100 sacks of Grain B)

Holding Cost

50 sacks

100 sacks

2) If it costs you $100 to have stuff delivered to the brewery, what is your annual ordering cost? (Assume that you are ordering things once a month.) What is your total annual cost?

3) Suppose that you want to repeat this ordering scheme to minimize costs. Use eqn 10.5 to determine the optimal number of sacks of grain to order. Since both items are going being purchased at the same time, assume demand is 300 units. Calculate your total annual cost using this new Q value.

4) If the supplier of grain tells you that they will give you a discount on your grain and only charge you $40 per sack if you order 400 sacks or more at a time. IS this a good deal? (Calculate your Total Annual Cost assuming Q = 400).

5) Calculate your reorder point if it will take 10 - 14 days from the time you order to the time it is delivered. (Use m = 10 and 14, so there will be 2 answers here.)

6) On average, how many sacks of each type of grain (A and B) will you have left, using the cheapest option from Question 2 to Q4

7) Keeping in mind that these are simplified versions of real world business issues, can you imagine how much work it takes to be an entrepreneur? If 60% of small businesses fail within the first year, does it make sense to get these calcs right?