What is the cost to the pet shop of not using the


One of the top selling items in a pet shop is a birdfeeder. Sales are 18 units per week, and the supplier charges $50 per unit. The cost of placing an order with the supplier is $60. Annual holding costs are 25% of a feeder's value and the pet shop operates 52 weeks per year. Management chose a 390 unit lot size so that new orders can be placed less frequently.

  • What is the cost to the pet shop of not using the EOQ?
  • If the lot size were set at the EOQ, how often would orders be placed?
  • When should they be placed?

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Finance Basics: What is the cost to the pet shop of not using the
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