A particular bottom-line DVD player is a standard item stocked by a certain retailer. Each year 2,000 units are sold. Storage costs are estimated at $5 per unit per year. Each time an order is placed, it cost $10.
a. What should the order size (EOQ) be?
b. What is the annual cost for ordering the DVD player?
c. What is the annual cost for storing the DVD player?
d. What is the time in days between orders, assuming 365 working days per year?
e. If the retailer's current policy is to order 2,000 units once a year, what is the savings from switching to an EOQ policy?