Calculate the optimal economic order quantity

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Reference no: EM132215547

At a college counselling office, an inventory of hats from each of 50 top universities is maintained so that new customers can choose a hat based on the University they seek to enter. BU hats cost the company $8.50 each. Last year, demand for BU hats was 300 per month, evenly spaced throughout the year. This demand is expected to continue in the future. The shipping and other ordering costs for the hats is $75 per order. The holding cost rate is estimated to be 25% annually. a. If the company used a fixed order quantity model, calculate the optimal economic order quantity (EOQ). Show all work. b. If management decided to order the hats on a monthly basis (one order per month), how much more would it cost the company per year (using just ordering and holding costs)? Show all work.

Reference no: EM132215547

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