What is the annual inventory cost

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A local jacket distributor expects to sell 9,000 black fleece jackets in a year. Assume that EOQ model assumptions are valid. Each jacket costs $50, ordering cost is $100 per order, and holding cost is 1 dollar per jacket per month.

a) What is the annual inventory cost (AIC) if 500 jackets are ordered at a time? (Hint: you need to convert the 1 dollar monthly holding cost to yearly cost.)

b) What is the optimal order quantity Q0? When the lead time is 0, what is the order cycle t (in month) between two orders when using this optimal order quantity?

c) Assume this jacket distributor operates 360 days a year. If the lead time is 10 days, what is the reorder point (i.e., the inventory position when placing an order)?

d) Suppose the supplier sells the product in boxes. Each box contains 25 jackets. What is the optimal order quantity? What is the corresponding annual inventory cost? If the lead-time is 0 days, what is the order policy (write in the format of [X, Q* ])?

Reference no: EM13962217

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