EOQ for a retailer. The Cloth Centre buys fabrics and sells them'to a wide range ofindustrial and consumer users. One ofthe products it carries is denim cloth, used in the manufacture ofjeans 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 mer¬

chandise. The purchasing officer ofthe Cloth Centre has collected the following information:

Annual demand for denim cloth Ordering costs per purchase order Carrying costs per year

$afety stock requirements Cost of denim cloth 24,000 metres

$192 20% of purchase cost None

$9.60 per metre The purchasing lead time is two weeks. The Cloth Centre is open 250 days a year (50 weeks for five days a week).

Required 1. Calculate the EOQ for denim cloth.

2. Calculate the number of orders that will be placed each year.

802 CHAPTER 20 3. Calculate the reorder point for denim cloth.