The Soft Goods Department of a Large Department Store Sells

question 128

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 I = 27% per year.Determine (a)the optimal order quantity, (b)the order frequency,and (c)the annual holding and setup cost.If,through automation of the purchasing process,the ordering cost can be cut to $4.00,what will be (d)the new economic order quantity, (e)the order frequency,and (f)annual holding and setup costs? Explain these results.

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Definitions:

Normal Distribution

A probability distribution that is symmetrical around the mean, showing that data near the mean are more frequent in occurrence than data far from the mean.

Degrees of Freedom

The number of independent values or quantities that can vary in the analysis of statistical data, crucial for assessing the reliability of various statistics.

Unbiased Estimator

An unbiased estimator is a statistical term for an estimate that is expected to be equal to the true parameter of the population.

Population Parameter

A numerical value that summarizes or describes an aspect of a population, such as its mean or standard deviation.