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What is fixed setup cost per order

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You manage the inventory of a shoe store using an EOQ model. To ship each order, the cost is 190+3* order quantity. The purchase cost is $17 per pair. You sell each pair for $35. Your daily demand is estimated to be 22 pairs. Assume that there are 364 days a year. The (annual) financial interest is 10%.

1) What is your annual demand?
2) What is your unit holding cost(per year)
3) What is your fixed setup cost per order?

Currently you order every two weeks(14 days)

1) How many orders do you place a year?

2) What is your annual setup cost?

You want to make your inventory turnover be 8 turns a year.

1) What is your average inventory?

2) What is your annual holding cost?

You want to minimize the total inventory-related cost.

1) How many pairs should be ordered each time? (round whole number)

2) Which cost is higher, the annual setup cost or the annual holding cost?

Your supplier pack 500 pairs of shoes in each package. In other words, the shoes must be ordered in hundreds, eg: 500,1000, To minimize the total inventory-related cost, how many pairs should be ordered?

Reference no: EM132677503

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How to determine the order quantity : To ship each other, the cost is 190+3* order quantity. The purchase cost is $17 per pair. You sell each pair for $35. Your daily demand is estimated to be 22 pa

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