Topic: FOQ model with usage and FOQ model with uncertain demand
The store manager of Target has reviewed the policy of placing 100 units of item #3482-02 in each order. He found this ordering policy resulted in total annual setup cost and carrying costs of $6,395 and $4,737, respectively. Based on the provided accounting data, can you tell whether the company is using the FOQ policy? If not, what actions should be taken by the manager in order to reduce the total costs (i.e., the sum of total setup and carrying costs)?