Jean Warehouse is analyzing the demand for their new demin jackets. Market analysis and review...
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Jean Warehouse is analyzing the demand for their new demin jackets. Market analysis and review of past sales reveal that the average annual demand will be 730 jackets. The company requires a 7% rate of return on investment. Further analysis regarding costs are:
Purchase price per jacket $135
Orders per year 6
Average daily demand 2
Lead time in days 10
Cost of placing an order $4
Relevant insurance, handling costs $3
Required:
a. Calculate the EOQ for the jackets. Round up to the nearest whole unit.
b. What are the annual carrying costs for the product if the company orders at the EOQ amount? Round answer to the nearest dollar.
c. What are the annual ordering costs for the product if the company orders at the EOQ amount? Round answer to the nearest dollar. d. What is the reorder point for the product?
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