computation of economic order quantity of books


Computation of Economic Order quantity of Books for college.

The bookstore at Smith College purchases sport shirts with the college logo to sell from a local vendor. The vendor sells the sport shirts to the college for $38 each.  The cost to the bookstore for placing each order is $120.  The carrying cost is $5.20 per shirt per year. The bookstore estimates that 1700 sport shirts will be sold over the next year and does not want any shortages. The bookstore sells the shirt for $50 each. There are 260 business days a year for the bookstore.   Lead time for filling an order once placed is 2 weeks. The vendor has offered the College Bookstore the following discounts:

Order Size

Discount

% of Order

Cost of Shirts from Vendor

1-299

0% discount

$38

300-499

2% discount

$37.24

500-799

4% discount

$36.48

800+

6% discount

$35.72

What is their expected total inventory cost (excluding the unit cost of the shirts)?

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Corporate Finance: computation of economic order quantity of books
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