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Your monthly demand for the Whatchamacallit is 20,000 units. You estimate that your fixed ordering cost is $450 and the annual holding cost percentage is 15%. You sell each Whatchamacallit for $80, and your profit margin is $50 per unit. (Round order quantities to whole numbers and costs to 2 decimals.)
If you have a single warehouse to store the inventory, what is the economic order quantity (EOQ) for the Whatchamacallit? What is the total annual cost (holding + setup)?
Now suppose you have four warehouses across the country, and the total demand is equally distributed among the four warehouses. Each warehouse has the same fixed ordering cost and annual holding cost percentage as the warehouse in (a). What is the EOQ at each warehouse (hint: it should be the same for all four warehouses)? What is the annual cost (holding + setup) at each warehouse? What is the annual company cost (holding + setup)?
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