Fan Base (FB) operates a megastore featuring sports merchandise. It uses an E0Q decision model to make inventory decisions. It is now considering inventory decisions for its Los Angeles Galaxy soccer jerseys product line. This is a highly popular item. Data for 2011 are as follows: Expected annual demand for Galaxy jerseys Ordering cost per purchase order Carrying cost per year Each jersey costs FB $40 and sells for $80. The $7 carrying cost per jersey per year comprises the required return on investment of $4.80 (12% x $40 purchase price) plus $2.20 in relevant insurance, handling, and theft-related costs. The purchasing lead time is 7 days. FB is open 365 days a year. a) Calculate the E0Q. Required 10,000 $200 $7 per jersey b) Calculate the number of orders that will be placed each year. c) Calculate the reorder point.

Fan Base (FB) operates a megastore featuring sports merchandise. It uses an E0Q decision model to make inventory decisions. It is now considering inventory decisions for its Los Angeles Galaxy soccer jerseys product line. This is a highly popular item. Data for 2011 are as follows: Expected annual demand for Galaxy jerseys Ordering cost per purchase order Carrying cost per year Each jersey costs FB $40 and sells for $80. The $7 carrying cost per jersey per year comprises the required return on investment of $4.80 (12% x $40 purchase price) plus $2.20 in relevant insurance, handling, and theft-related costs. The purchasing lead time is 7 days. FB is open 365 days a year. a) Calculate the E0Q. Required 10,000 $200 $7 per jersey b) Calculate the number of orders that will be placed each year. c) Calculate the reorder point.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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. Wonder Line (WL) operates a megastore featuring sports merchandise. It uses an EOQ decision model to make inventory decisions. It is now considering inventory decisions for its Los Angeles Galaxy soccer jerseys product line. This is a highly popular item. Data for 2017 are as follows: Expected annual demand for Galaxy jerseys 9,000 Ordering cost per purchase order $250 Carrying cost per year $8 per jersey Each jersey costs WL $50 and sells for $100. The $8 carrying cost per jersey per year consists of the required return on investment of $5.00 (10% * $50 purchase price) plus $3.00 in relevant insurance, handling, and storage costs. The purchasing lead time is 5 days. WL is open 365 days a year. Q. Calculate the EOQ.
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