Computation of economic order quantity

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Reference no: EM1315858

Computation of Economic Order quantity of Books for college.

The bookstore at Smith College purchases sport shirts with the college logo to sell from a local vendor. The vendor sells the sport shirts to the college for $38 each.  The cost to the bookstore for placing each order is $120.  The carrying cost is $5.20 per shirt per year. The bookstore estimates that 1700 sport shirts will be sold over the next year and does not want any shortages. The bookstore sells the shirt for $50 each. There are 260 business days a year for the bookstore.   Lead time for filling an order once placed is 2 weeks. The vendor has offered the College Bookstore the following discounts:

Order Size

Discount

% of Order

Cost of Shirts from Vendor

1-299

0% discount

$38

300-499

2% discount

$37.24

500-799

4% discount

$36.48

800+

6% discount

$35.72

What is their expected total inventory cost (excluding the unit cost of the shirts)?

Reference no: EM1315858

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