Scenario: The owner of a large bicycle sales and repair business stocks a popular brand of mountain bikes. Based on historical data, the estimated annual demand for the bikes is 1375 units. The estimated average demand per day is 11 units. The purchase cost from the distributor is $765.00 per unit. The lead-time for a new order is 7 days. The ordering cost is $72.50 per order. The average holding cost per unit per year is $32.51. The business has traditionally ordered 48 units each time they placed an order. Based upon using the businesses’ current ordering model:

1. What is the average dollar value of inventory based upon ordering using the EOQ? (Rounded to the nearest dollar)

$23,108

$25,806

$28,033

$29,953

2. What is the total annual cost (Purchase Cost + Ordering Cost + Holding Cost) based upon using the EOQ? (Rounded to the nearest dollar)

$858,573

$943,049

$1,054,421

$924,545

3. What is the optimal reorder point based upon using the EOQ?

54

56

66

77