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Computation of Economic Order quantity of Books for college.
The bookstore at Smith College purchases sport shirts with the college logo to sell from a local vendor. The vendor sells the sport shirts to the college for $38 each. The cost to the bookstore for placing each order is $120. The carrying cost is $5.20 per shirt per year. The bookstore estimates that 1700 sport shirts will be sold over the next year and does not want any shortages. The bookstore sells the shirt for $50 each. There are 260 business days a year for the bookstore. Lead time for filling an order once placed is 2 weeks. The vendor has offered the College Bookstore the following discounts:
Order Size
Discount
% of Order
Cost of Shirts from Vendor
1-299
0% discount
$38
300-499
2% discount
$37.24
500-799
4% discount
$36.48
800+
6% discount
$35.72
What is their expected total inventory cost (excluding the unit cost of the shirts)?
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