Exercise $11\mathrm{.}3$

A North Face retail store in Chicago sells $500$ jackets each month. Each jacket costs the store $$150$ and

the company has an annual holding cost of $25$ percent. The fixed cost of a replenishment order

$($including transportation$)$ is $$120.$ The store currently places a replenishment order every month for $600$

jackets.

A$)$ What is the annual holding cost?

B$)$ What is the annual ordering cost?

C$)$ On average, how many days does a jacket spend in inventory, assuming $365$ days per year?

D$)$ If the retail store wants to minimize the total of ordering plus holding costs, what order size do

you recommend?

E$)$ How much would the optimal order change the annual holding cost relative to the current

policy?

F$)$ How much would the optimal order change the annual ordering cost relative to the current

policy?