20-16 economic order quantity for retailer fan base fb, Ask an Expert

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20-16 Economic order quantity for retailer. Fan Base (FB) operates a megastore featuring sports

merchandise. It uses an EOQ decision model to make inventory decisions. It is now considering inventory

decisions for its Los Angeles Galaxy soccer jerseys product line. This is a highly popular item. Data for 2013

are as follows:

Expected annual demand for Galaxy jerseys 10,000

Ordering cost per purchase order $200

Carrying cost per year $7 per jersey

Each jersey costs FB $40 and sells for $80. The $7 carrying cost per jersey per year consists of the required

return on investment of $4.80 112% * $40 purchase price2 plus $2.20 in relevant insurance, handling, and

storage costs. The purchasing lead time is 7 days. FB is open 365 days a year.

1. Calculate the EOQ.

2. Calculate the number of orders that will be placed each year.

3. Calculate the reorder point.

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Financial Accounting, Accounting

Category:- Financial Accounting
Reference No.:- M91591069

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