The soft goods department of a large department store sells 175 units per month of a certain large bath towel. The unit cost of a towel to the store is $2.50 and the cost of placing an order has been estimated to be $12.00. The store uses an inventory carrying charge of I = 27% per year. Determine:
If, through automation of the purchasing process, the ordering cost can be cut to $4.00, what will be
d) the new economic order quantity,
e) the order frequency, and
f) annual holding and setup costs? Explain these results.