A North Face retail store in Chicago sells 500 jackets each month. Each jacket costs the store
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Question:
A North Face retail store in Chicago sells 500 jackets each
month. Each jacket costs the store $100 and the company has
an annual holding cost of 25 percent. The fixed cost of a
replenishment order (including transportation) is $100. The
store currently places a replenishment order every month for
500 jackets.
requirement
What is the annual holding and ordering cost?
On average, how long does a jacket spend in inventory?
If the retail store wants to minimize ordering and holding cost,
what order size do you recommend?
How much would the optimal order reduce holding and ordering cost relative to the
current policy?
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