Problem
You are the manager of a store. You sell stuffed student card at a rate of 50 per day with a standard deviation of demand of 30 per day. You sell them for $15 and each student card costs you $5.00. Shipping costs from your supplier are $10 per order and it costs you approximately $15 to fill out the order form. Because of your location, your holding rate is 30%. Note that you are open 10 hours/day, 7 days/week, 365 days/year.
i. What quantity would you order to minimize your inventory costs?
ii. If you ordered 2,000 student cards each time what would your annual inventory costs be?