The West Indies School Book Shop sells T Shirts emblazoned with the school’s name and logo. The shirts cost $2,000 each and management estimates that 900 T Shirts will be sold during each month of the year. The annual holding cost for a unit of that inventory is estimated to be 1.5% of the purchase price. It costs the Book Shop $500 to place a single order. The maximum sale for the Book Shop for any one week is 300 shirts and minimum sales 150 shirts. The supplier takes anywhere from 2 to 4 weeks to deliver the merchandise after the order is placed. Determine the highest number of shirts that should be purchased by the Gift Shop in order to minimize stock administration cost. What is the total stock administration costs? Using the EOQ policy, determine the re-order level, minimum inventory level and maximum inventory level for the T Shirts.
The West Indies School Book Shop sells T Shirts emblazoned with the school’s name and logo. The shirts cost $2,000 each and management estimates that 900 T Shirts will be sold during each month of the year. The annual holding cost for a unit of that inventory is estimated to be 1.5% of the purchase price. It costs the Book Shop $500 to place a single order. The maximum sale for the Book Shop for any one week is 300 shirts and minimum sales 150 shirts. The supplier takes anywhere from 2 to 4 weeks to deliver the merchandise after the order is placed. Determine the highest number of shirts that should be purchased by the Gift Shop in order to minimize stock administration cost. What is the total stock administration costs? Using the EOQ policy, determine the re-order level, minimum inventory level and maximum inventory level for the T Shirts.
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
Problem 7E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The...
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The West Indies School Book Shop sells T Shirts emblazoned with the school’s name and logo. The shirts cost $2,000 each and management estimates that 900 T Shirts will be sold during each month of the year. The annual holding cost for a unit of that inventory is estimated to be 1.5% of the purchase price. It costs the Book Shop $500 to place a single order.
The maximum sale for the Book Shop for any one week is 300 shirts and minimum sales 150 shirts. The supplier takes anywhere from 2 to 4 weeks to deliver the merchandise after the order is placed.
- Determine the highest number of shirts that should be purchased by the Gift Shop in order to minimize stock administration cost.
- What is the total stock administration costs?
- Using the EOQ policy, determine the re-order level, minimum inventory level and maximum inventory level for the T Shirts.
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