A local jacket distributor expects to sell 9,000 black fleece jackets in a year. Assume that EOQ model assumptions are valid. Each jacket costs $50, ordering cost is $100 per order, and holding cost is 1 dollar per jacket per month.
a) What is the annual total inventory cost if 500 jackets are ordered at a time? (Hint: you need to convert the 1 dollar monthly holding cost to yearly cost.)
b) What is the optimal order quantity? What is the order cycle (in month) between two orders when using this optimal order quantity?
c) Suppose the supplier sells the product in boxes. Each box contains 25 jackets. What is the optimal order quantity? What is the corresponding annual inventory cost?