Calculate the economic order quantity

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Reference no: EM131754058

1. John started his business in outdoor material. He bought Wetsuits from O’neill and is selling the suits in his outdoor-shop. Each Wetsuit cost him $160. He sells the suits for $365. And is planning to sell the suits in the aftermarket (end of season) for $180. The type of the wetsuit is the JR HAMMER 3/2. He used the data of last year (appendix) to compute the order quantity.

a) What is the underage cost?

b) What is the overage cost?

c) What is the quantity of JR HAMMER 3/2 wetsuits he had to order to maximize profit according to the News Vendor Model? You can find or calculate the A/F ratio by using the table in the appendix. The mean is 1220 wetsuits. Also the standard normal distribution table is in the appendix.

2. Rolls Royce supplies Boeing with 46 engines per month. The product cost $65,000. This is the price per engine. Ordering cost to start the machines for manufacturing is $2,500. The holding cost is 5% of the product cost.

Calculate the economic order quantity.

Reference no: EM131754058

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