Solution-Explain the required return on investment

Explain the required return on investment

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Reference no: EM133073237

Red Revival (RR) operates a megastore featuring sports merchandise. It uses an EOQ decision model to make inventory decisions. It is now considering inventory decisions for its Brisbane Bears jerseys. This is a highly popular item. Data for 2014 are:

Expected annual demand for Bears' jerseys	18,000
Ordering cost per purchase order	$114.7
Carrying cost per year	$8.3 per jersey

Each jersey costs RR $46 and sells for $100. The $8.3 carrying cost per jersey per year comprises the required return on investment of $0.552 (12%x$46 purchase price) plus $1.4 in relevant insurance, handling and theft-related costs. The purchasing lead time is seven days. RR is open 365 days a year.

Calculate and enter the reorder point in the answer block below:

Reference no: EM133073237

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Explain the required return on investment

Reference no: EM133073237

Reference no: EM133073237

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