1. A department store sells 10,000 units of handbags per year. The store orders handbags from a manufacturer. Each time an order is placed, an ordering cost of $40 is incurred. The store pays $30 for each hand bag. The holding cost of $1 of inventory is 25 cents per year. (i.e. inventory holding rate is 25%). What is the economic order quantity?
2. Free Cash Flow Catering Corp. reported free cash flows for 2008 of $8.1 million and investment in operating capital of $2.1 million. Catering listed $0.99 million in depreciation expense and $2.1 million in taxes on its 2008 income statement. What was Catering's 2008 EBIT? $11.31 million $7.11 million $10.2 million $13.29 million.