20-16 Economic order quantity for retailer. Fan Base (FB) operates a megastore featuring sports
merchandise. It uses an EOQ decision model to make inventory decisions. It is now considering inventory
decisions for its Los Angeles Galaxy soccer jerseys product line. This is a highly popular item. Data for 2013
are as follows:
Expected annual demand for Galaxy jerseys					10,000
Ordering cost per purchase order					$ 200.00
Carrying cost per year					$ 7.00	per jersey
Each jersey costs FB $40 and sells for $80. The $7 carrying cost per jersey per year consists of the required
return on investment of $4.80 112% * $40 purchase price2 plus $2.20 in relevant insurance, handling, and
storage costs. The purchasing lead time is 7 days. FB is open 365 days a year.
1. Calculate the EOQ.
2. Calculate the number of orders that will be placed each year.
3. Calculate the reorder point.