What are resulting annual ordering cost and holding cost

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Reference no: EM132169857

SM Inc. (SMI) is manufacturing caps in four colors: black, red, white, and blue. The monthly demand for each color is 4,000 units. Each cap requires .5 pound of raw cotton that is imported from the Sheena Textile Company in Mumbai. The purchase price per pound is $3.50 and transportation cost by sea is $0.30 per pound. The lead-time is 2 weeks with negligible variability. The cost of placing an order, by SMI, is $100 and the annual opportunity cost of capital is 25 percent.

What is the optimal order quantity?

How frequently should SMI order?

Assuming that the first order is need by May 31, when should SMI place the order?

How many orders will SMI place during the next quarter?

What are the resulting annual ordering cost and holding cost?

Reference no: EM132169857

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