The Soft Goods Department of a Large Department Store Sells

question 8

Essay

The soft goods department of a large department store sells 175 units per month of a certain large bath towel. The unit cost of a towel to the store is $2.50 and the cost of placing an order has been estimated to be $12.00. The store uses an inventory carrying charge of 27% per year. Determine the optimal order quantity, order frequency, and the annual cost of inventory management. If, through automation of the purchasing process, the ordering cost can be cut to $4.00, what will be the new economic order quantity, order frequency, and annual inventory management cost?
Explain these results.

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Definitions:

Pituitary Gland

A pea-sized gland just beneath the hypothalamus that controls growth and regulates other glands.

Adrenal Glands

Small, triangular glands located above the kidneys that produce hormones like cortisol and adrenaline, which help control stress responses, metabolism, immune system, and blood pressure.

Genetic Heritage

The genetically inherited characteristics and traits passed down from one's ancestors.

Genotype

The genetic makeup of an organism, which determines its characteristics and can be passed to its offspring.