Demand for a Popular Athletic Shoe Is Nearly Constant at 800

question 10

Essay

Demand for a popular athletic shoe is nearly constant at 800 pairs per week for a regional division of a national retailer.The cost per pair is $54.It costs $72 to place an order,and annual holding costs are charged at 22% of the cost per unit.The lead time is two weeks.
a.What is the EOQ?
b.What is the reorder point?
c.What is the cycle time?
d.What is the total annual cost?

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Definitions:

Inventory Items

Goods or materials that a business holds for the purpose of sale or production in the normal course of operation.

Estimating Value of Inventory

The process of calculating the worth of unsold goods at the end of an accounting period using methods such as FIFO or LIFO.

Gross Profit Method

An inventory estimation technique that calculates the cost of goods sold by deducting sales revenue from the gross profit percentage.

Net Realizable Value

The estimated selling price of goods, minus the costs of their sale or disposal, used to assess the value of inventory or receivables.