Discuss the below:
Q: Kee Wah Store sells a variety of exquisite European cookies and candies to the consumer market. The demand for cookies and candies is volatile and varies from s month to month. The store orders from its suppliers. The lead time is normally one month, mainly consisting of the sea freight transportation time from Europe to Singapore. The store keeps a certain level of inventory at its warehouse.
The total demand for chocolate cookies is estimated to be 7, 200 packets a year. The chocolate cookie packet is sourced from the supplier at $5 per packet and is sold to the end consumer at $15 per packet. It costs $100 to place an order to the supplier, and costs 20% of unit cost to store a packet of chocolate cookies for one year.
Examine the inventory situation for Kee Wah Store by applying the EOQ model to solve for order quantity and reorder point. What is the annual ordering cost. annual holding cost and total annual cost?