=+17-16 K Economic order quantity for retailer OBJECTIVE 2 Red Revival (RR) operates a megastore featuring sports merchandise. It uses an EOQ decision model to make inventory decisions.

It is now considering inventory decisions for its Brisbane Bears jerseys. This is a highly popular item. Data for 2014 are:

Expected annual demand for Bears’ jerseys 12 000 Ordering cost per purchase order $85.50 Carrying cost per year $7.75 per jersey Each jersey costs RR $40 and sells for $80. The $7.75 carrying cost per jersey per year comprises the required return on investment of $4.80 (12% × $40 purchase price) plus $2.95 in relevant insurance, handling and theft-related costs. The purchasing lead time is seven days. RR is open 365 days a year.

Required 1 Calculate the EOQ.