Minimize total inventory cost and maximize profits

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Reference no: EM131132154

Joe's Hoverboards is attempting to minimize total inventory cost and maximize profits in 2016. Each Hoverboard costs Joe $95 to buy and he sells them for $150 each. Joe’s mom helps with the purchasing and ordering and he pays her $100 for every order she places. Joe rents warehouse space to store his inventory and he pays $250 per month for the lease. Hoverboards are a hot item and Joe expects to sell 2,400 of them in 2016 year. He is currently ordering once a month, but he thinks that he can save money if he optimizes his order quantity. a. If Joe continues to order once a month in 2016, what will his Total Annual Cost of Inventory be? b. Assuming Joe sells everything that he orders in 2016, what will his annual profit be if he continues to order once a month? c. What quantity should Joe to order that would minimize Total Cost of Inventory? d. How much will Joe’s profit change if he orders based on the EOQ rather than ordering once a month?

Reference no: EM131132154

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Minimize total inventory cost and maximize profits : Joe's Hoverboards is attempting to minimize total inventory cost and maximize profits in 2016. Each Hoverboard costs Joe $95 to buy and he sells them for $150 each. Joe’s mom helps with the purchasing and ordering and he pays her $100 for every order..

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