Question

In: Statistics and Probability

EOQ for a retailer

EOQ for a retailer. The Cloth Center 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 Center has collected the following information:

Annual demand for denim cloth 20,000 yards Ordering cost per purchase order $160 20% of purchase costs Carrying cost per

The purchasing lead time is 2 weeks. The Cloth Center 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 denimcloth.

Expert Solution

EOQ for a retailer.

1.

D = 20,000, P = $160, C = 20% × $8 = $1.60

2.

3.

= 80 yards per day

= 400 yards per week

Purchasing lead time = 2 weeks

Reorder point = 400 yards per week × 2 weeks = 800 yards

EOQ for a retailer. The Cloth Center 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 Center has collected the following information:

Reorder point = 400 yards per week × 2 weeks = 800 yards

Raffay answered 2 years ago

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