Customer comes to buy robe but finds it stocked out

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Reference no: EM133739827

Question

Your hotel's gift shop sells 12,000 luxury robes each year. Each robe sells for $350. It costs you $1000 each time an order is placed, and inventory costs due to warehousing expenses are $0.5 per week per robe. It takes two month for an order to arrive. Monthly demand is 1000 robes with a standard deviation of 200. If a customer comes to buy a robe but finds it stocked out, their order is backordered and shipped to their home once stock becomes available. On average it costs you about $35 to ship one robe to guest's home. You estimate that opportunity cost of capital is around 10% per year. What is the economic quantity for you to order? Your hotel's gift shop sells 12,000 luxury robes each year. Each robe sells for $350. It costs you $1000 each time an order is placed, and inventory costs due to warehousing expenses are $0.5 per week per robe. It takes two month for an order to arrive. Monthly demand is 1000 robes with a standard deviation of 200. If a customer comes to buy a robe but finds it stocked out, their order is backordered and shipped to their home once.

Reference no: EM133739827

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