a)- Calculate the current annual total inventory holding cost and annual total ordering cost b)- Calculate the economic order quantity c)- Calculate the annual total inventory holding costs and the annual total ordering cost if EOQ is used d)- Compare the su
Jason owns a fish shop where he sells an exotic variety of tuna fish which he imports from
Japan. Jason refrigerates the fish in a cold storage facility near his shop that charges him a
variable charge of $5 per day for each fish container that is stored. In addition the cold
storage charges a fixed annual fee of $1000. Every morning, Jason brings fish from the cold
storage to his shop for sale. Jason estimates that he incurs $10,000 electricity cost each year
on refrigerating the fish inside his own shop.
Jason incurs the following ordering costs: Delivery Charges of $10,000 per delivery, and
Custom Fees of $200 per order.
Jason currently imports fish by placing one order of 20 cartons every month, which is the
monthly demand of this tuna fish at his shop. Each carton costs $2,000.
Jason is wondering if he can save inventory costs by adopting EOQ model.
a)- Calculate the current annual total inventory holding cost and annual total ordering cost
b)- Calculate the economic order quantity
c)- Calculate the annual total inventory holding costs and the annual total ordering cost if EOQ
is used
d)- Compare the sum of total annual ordering and holding costs in the two scenarios and
comment. How much is the saving in adopting EOQ?
Assume 365 days in a year.
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