Brown Sporting Goods, inc. buys baseball at $10 per dozen from its wholesales. Brown buys 1,600 dozen every 2 months, Brown will order 6 times in one year. The firm incurs interest expense of 20% on its inventory investment. In addition, rent, insurance, and property tax per year for each dozen baseballs in the average inventory is $0.5. The cost involved in handling each purchase order is $3,000. Required: 1.Determine the optimal
Brown Sporting Goods, inc. buys baseball at $10 per dozen from its wholesales. Brown buys 1,600 dozen every 2 months, Brown will order 6 times in one year. The firm incurs interest expense of 20% on its inventory investment. In addition, rent, insurance, and property tax per year for each dozen baseballs in the average inventory is $0.5. The cost involved in handling each purchase order is $3,000. Required: 1.Determine the optimal
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Brown Sporting Goods, inc. buys baseball at $10 per dozen from its wholesales. Brown buys 1,600 dozen every 2 months, Brown will order 6 times in one year. The firm incurs interest expense of 20% on its inventory investment. In addition, rent, insurance, and property tax per year for each dozen baseballs in the average inventory is $0.5. The cost involved in handling each purchase order is $3,000.
Required:
1.Determine the optimal order quantity using the EOQ model. 2.Determine the relevant total costs of ordering and carrying costs.
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