Inventory Questions

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7. The soft goods department of a large department store sells 175 units per month of a certain large bath towel. The unit cost of a towel to the store is $2.50 and the cost of placing an order has been estimated to be $12.00. The store uses an inventory carrying charge of 27% per year. Determine the optimal order quantity, order frequency, and the annual cost of inventory management.
b)If, through automation of the purchasing process, the ordering cost can be cut to $4.00, what will be the new economic order quantity, order frequency, and annual inventory management cost? Explain these results.

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