21-22. ECONOMIC ORDER QUANTITY, EFFECT OF PARAMETER CHANGES (CONTINUATION OF 21-21). Sportsman Textiles (ST) manufactures the Galaxy jerseys that Wonder Line (WL) sells to its customers. ST has recently installed computer software that enables its customers to conduct one-stop purchasing using state-of-the-art Web site technology. WLs ordering cost per purchase order will be $40 using this new technology.

1. Required
2. 1. Calculate the EOQ for the Galaxy jerseys using the revised ordering cost of $40 per purchase order. Assume all other data from Exercise 21-21 are the same. Comment on the result.
3. 2. Suppose ST proposes to assist WL. ST will allow WL customers to order directly from the ST Web site. ST would ship directly to these customers. ST would pay $12 to WL for every Galaxy jersey purchased by one of WLs customers. Comment qualitatively on how this offer would affect inventory management at WL. What factors should WL consider in deciding whether to accept STs proposal?

Calculate spending and efficiency variances for exercise 8-21 and fixed spending and production volume variance for 8-22. Comment on the variances and give the reasons and effect in operating income.

\begin{tabular}{ll} Expected annual demand for Galaxy jerseys & 9,000 \\ Ordering cost per purchase order & $250 \\ Carrying cost per year & $8 per jersey \end{tabular}