Cost is independent of the order quantity

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Reference no: EM131468462

A retail store purchases a type of product directly from a manufacturer at a unit purchasing cost of $50. The demand for the product is constant over time, with a demand rate of 500 units per year. The annual holding cost of one unit of inventory is 4% of the unit purchasing cost. Placing an order from the manufacturer incurs a fixed ordering cost of $120 per order. This cost is independent of the order quantity.

A) The unit holding cost h =$ ______________ .

Note: you need to report both the value and the unit of the holding cost.

Please show your analysis below:

B) Please calculate the EOQ (Economic Order Quantity) that the retail store should use for ordering.

The EOQ Q*= _________ units. (Round your answer to the nearest integer)

C) The minimum annual inventory-related cost associated with Q*, C* = $ ______________ . (Keep 2 decimals in your answer)

Please show you analysis below:

D) The retail store needs to place an order every ____________ months. (1 year = 12 months) (Keep 1 decimal in your answer)

Please show your analysis below:

E) If the product can only be acquired as batches with batch size of 25 units/batch, then the optimal number of batches the retail store should replenish is _________ batches.

Please show your analysis below:

F) If the demand rate of the product is increased from 500 units/year to 1500 units/year, i.e., demand rate is tripled,

The EOQ should also be tripled

The EOQ should remain the same

The EOQ should increase, but not as much as tripled

The EOQ should increase, but more than tripled

Please circle your answer and briefly explain your choice below:

Reference no: EM131468462

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