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What is the optimal order quantity

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Reference no: EM132804772

You are considering starting a new business of selling hoodies with the IU logo. The annual demand is 1,200. Assume that demand is perfectly steady throughout the year. You can purchase the hoodies from Supplier A for a price of $40 per hoodie and a $2,000 fixed cost for every order placed independent of the order size. The annual holding cost for each hoodie is 20% of its wholesale price.

1) What is the optimal order quantity?

Answer in number of hoodies you order every time you place an order. Round your answer to 2 decimal places

2) Inventory Management: IU Hoodies

Based on the optimal order size, what is the total holding cost per year?

Do not round until your final answer. Round final answer to 2 decimal places.

3) ?Suppose you find another supplier, Supplier B, before you sign the purchase contract with Supplier A. If you buy hoodies from Supplier B, you place only one order per year with an order size of the entire annual demand of 1,200. Supplier B offers a lower price of $30 per hoodie and a fixed cost of $11,000 for delivery. Assume the annual holding cost for each hoodie is 20% of the wholesale price.

How much of a $ savings does Suppler B offer vs Supplier A?

Compare the total cost. Answer with a positive number (ie: 100) if you save money by selecting Supplier B. Answer with a negative number (ie. -100) if Supplier B costs more than Supplier A. Round your final answer to 2 decimals. Do not round you work-in-progress calculations (ie. number of orders per year).

Reference no: EM132804772

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