Jose runs a mail-order business for gym equipment from his house in Dorado. Annual demand for the PuertoFlexers (the best seller) is 25,000 in the US. Assume that the year has 360 days. He sells each product for $350, earning a markup of 20%, including shipping and handling to the US. The annual holding cost per unit is $5.50 and the cost to process an order is $25. It takes ten days to completely process an order. (Write down any assumption that you have to make.)
- What are the EOQ and Total Cost of this situation?
- How long does a "cycle time" (the time between having all eoq quatitites and zero) last?
- If José has space for 545 products, can all be stored in his facilities?
- If José expect demand to rise by 10% next year, does he has to make any arrangements?