Question: EOQ for a retailer. The Fabric World sells fabrics to a wide range of industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The supplier for the denim cloth pays all incoming freight. No incoming inspection of the denim is necessary because the supplier has a track record of delivering high-quality merchandise. The purchasing officer of the Fabric World has collected the following information:

Annual demand for denim cloth                   40,700 yards

Ordering cost per purchase order                $185

Carrying cost per year                              10% of purchase costs

Safety-stock requirements                         None

Cost of denim cloth                                  $11 per yard

The purchasing lead time is 2 weeks. The Fabric World is open 220 days a year (44 weeks for 5 days a week).

1. Calculate the EOQ for denim cloth.

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

3. Calculate the reorder point for denim cloth.