A North Face retail store in Chicago sells 120 jackets per week. Each jacket costs the store $100 and the company has an annual holding cost of 20 percent. The fixed cost of a replenishment order (including transportation) is $100. The store currently places a replenishment order every month for 550 jackets.
For all questions that follow, round your answers to two (2) decimal places.
A- What is the annual holding cost?
B- What is the annual ordering cost?
C- What is the annual total cost including the purchasing cost?
D- If the retail store wants to minimize the annual total inventory cost, what order size do you recommend?
E- How much would the optimal order quantity reduce the annual total inventory cost relative to the current policy?