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(solution) The bathroom section of a large department store sells 18,233


The bathroom section of a large department store sells 18,233 specialty bath towels per year. The unit purchase cost of a towel from the store?s supplier is $2.40 per towel. The cost of placing an order to the supplier is $14.00 per order. The holding cost is $0.60 per towel per year. Assume that the Economic Order Quantity (EQQ) Model is appropriate here, and that EQQ= 922.43.

1) What is the max inventory level?

2) What is the average inventory level?

3) What is the approx. number of orders per year?

4) What is the total annual setup (i.e. order) cost?

5) What is the total annual holding cost?

 


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