Question: Suppose that your firm manufactures toy flying drones. Monthly demand for the drones is 230,000 units. Setup cost per order is $220, and the annual holding cost percentage is 24%. The drones cost $50 to produce and are sold for $99.
a. Suppose that you have 56 warehouses instead of one, and total demand is equally distributed among the warehouses. If setup and holding costs are the same in the smaller warehouses as they would be for the single large warehouse, what is the EOQ for the dolls at each of the 49 warehouses? What is the total of the annual setup and holding costs at each warehouse? What is the total of the company's annual setup and holding costs?