A retailer is making decision to procure a branded winter jacket after observing the initial sales for the winter season. Assume the winter season is consists of four months. The retailer sells an average of 1500 jackets a season. Preparing an order and receiving a shipment of winter jacket involves a cost of $550 per order. The purchasing price of the jacket is $30 and the annual (inventory) carrying cost of the jacket is 25% of the purchasing price.
Hints: Holding cost per season = [(25%)× (item cost)×( months in a season)]/(no of months in a year)
Assuming four months in the winter season. What is the unit carrying cost of the jackets for the season? I have 2.5
Using carrying cost determined by (a), what is the economic order quantity. I have 812 jackets
Compute total cost of reordering & carrying jackets. I have $2,031
If ordering costs were to increase by $100 per order, how much would that affect the total cost? I have $2,207.94 effecting cost by $176.94
[Hint: Find Qnew for ordering cost = $550+$100 = $650.]