You are in charge of ordering items for Boyer’s Department Store, located in Seattle. For one of the products Boyer’s carries, the Hudson Valley Model Y ceiling fan, you know the following information: annual demand is 4,000; annual holding cost is $15 per fan; and the cost per order is $50. Your predecessor order fans four times a year in quantities of 1,000.
What is the annual holding and ordering costs of your predecessor’s system?
What is the EOQ?
What is the cost difference between your predecessor’s system and EOQ?