Fan Base (FB) operates a megastore featuring sports merchandise. It uses an EOQ decision model to make
Question:
Expected annual demand for Galaxy jerseys...... 10,000
Ordering cost per purchase order.......... $200
Carrying cost per year.............. $ 7 per jersey
Each jersey costs FB $40 and sells for $80. The $7 carrying cost per jersey per year comprises the required return on investment of $4.80 (12% $40 purchase price) plus $2.20 in relevant insurance, handling, and theft-related costs. The purchasing lead time is 7 days. FB is open 365 days a year.
REQUIRED
1. Calculate the EOQ.
2. Calculate the number of orders that will be placed each year.
3. Calculate the reorder point.
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Related Book For
Cost Accounting A Managerial Emphasis
ISBN: 978-0133392883
6th Canadian edition
Authors: Horngren, Srikant Datar, George Foster, Madhav Rajan, Christ
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