The Cloth Bonanza sells fabrics to a wide range of industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The supplier for the denim cloth pays all incoming freight. No incoming inspection of the denim is necessary because the supplier has a track record of delivering high-quality merchandise. The purchasing officer of theCloth Banazahas collected the following information: Annual demand for denim cloth29,250 yardsOrdering cost per purchase order$195Carrying cost per year20% of purchase costsSafety-stock requirementsNoneCost of denim cloth$15 per yard The purchasing lead time is 2 weeks. TheCloth Banazais open250days a year(50weeks for 5 days a week). 1.Calculate the EOQ for denim cloth.2.Calculate the number of orders that will be placed each year.3.Calculate the reorder point for denim cloth.

Answer:- Formulas:- 1. EOQ = √(2 x Demand) x ( Order cost) / Carrying cost 2. Annual number of…

Answered: The Cloth Bonanza sells fabrics to a…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

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The Cloth Bonanza sells fabrics to a wide range of industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The supplier for the denim cloth pays all incoming freight. No incoming inspection of the denim is necessary because the supplier has a track record of delivering high-quality merchandise. The purchasing officer of the

Cloth Banaza

has collected the following information:

Annual demand for denim cloth	29,250 yards
Ordering cost per purchase order	$195
Carrying cost per year	20% of purchase costs
Safety-stock requirements	None
Cost of denim cloth	$15 per yard

The purchasing lead time is 2 weeks. The

Cloth Banaza

is open

250

days a year

(50

weeks for 5 days a week).

1.	Calculate the EOQ for denim cloth.
2.	Calculate the number of orders that will be placed each year.
3.	Calculate the reorder point for denim cloth.

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