The annual demand of Spec’s own brand of horchata rum is 192,000 bottles. The company manufactures
this popular beverage at a rate of 3200 bottles per day. The carrying cost is $4 per bottle per year due to
its perishable nature. Each time Specs engages in a production run of the beverage, it incurs $180 for
setup and other overhead expenses. The company operates 240 days per year.
Which FOQ inventory model should we use for the analysis here? What should be the optimal production
order size (Q) of the horchata rum? Likewise, what is the reorder level (R) under the FOQ policy?