This is a mail-order business for kitchen equipment. Annual demand for its best seller item is 25,000 units. This best seller item is sold at $350/unit, including shipping and handling. It has an earning markup of 20%. The annual holding cost per unit for this best seller is $5.50. The cost to process an order of this item is $25. It takes ten (10) days to completely process an order. Assume that the year has 360 days.
Please review, provide detailed calculations, and answer the following seven (7) questions:
1. What should be the cost per unit for this best seller if it is sold at $350 with an earning markup of 20%?
2. What is the EOQ for this item?
3. What is the Total Cost for this item?
4. How long does a cycle time last?
5. What impact (if any) has the ordering process lead time of ten days?
6. If the storage facility has space for 565 items, can all be stored at that facility?
7. If there is a demand increase of 15% next year, do we need to make any arrangements?