One of the top selling items in a pet shop is a birdfeeder. Sales are 18 units per week, and the supplier charges $50 per unit. The cost of placing an order with the supplier is $60. Annual holding costs are 25% of a feeder's value and the pet shop operates 52 weeks per year. Management chose a 390 unit lot size so that new orders can be placed less frequently.
- What is the cost to the pet shop of not using the EOQ?
- If the lot size were set at the EOQ, how often would orders be placed?
- When should they be placed?