The Boston store of BabyStuff, a fictional U.S. manufacturer of children’s apparel, is striving to improve its inventory management. The store estimates that its weekly sales are 1,600 units. Each order costs a fixed administrative expense of $4,000. Assume that there is no seasonality and that the lead time is zero. Holding costs are 10% of average inventory cost per year. On average, each unit of apparel costs the store $5.
a) What the economic ordering quantity (EOQ) of BabyStuff’s Boston store?
b) Based on the EOQ, what is the average number of replenishments made each year?
c) Based on the EOQ, what is the average annual holding cost?
d) Based on the EOQ, what is the average annual fixed ordering cost?