Problem:

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.

Questions:

$1.$ What is the annual holding and ordering cost?

$2.$ On average, how long does a jacket spend in inventory?

$3.$ If the retail store wants to minimize ordering and holding cost, what order size do you

recommend?

$4.$ How much would the optimal order reduce holding and ordering cost relative to the current

policy?