Inventory Control

Mirrors Boutique purchases sweatshirts emblazoned with the school name and logo from a vendor in Montego Bay at a cost of $2,000 each. The annual holding cost for a sweatshirt is calculated as 1.5% of the purchase cost. It costs the Boutique $500 to place a single order. The Boutique manager estimates that 900 sweatshirts will be sold during each month of the upcoming academic year.

i) Determine the highest number of shirts that should be purchased by the Boutique in order to minimize stock administration costs.

ii) What is the number of orders to be placed each year?

iii) Compute the average annual ordering cost

iv) Compute the average annual carrying cost

v) Compute the total stock administration cost

The maximum sale for the Boutique for any one week is 300 sweatshirts and minimum sales 150 sweatshirts. The vendor takes anywhere from 2 to 4 weeks to deliver the merchandise after the order is placed. Using the EOQ policy, determine the re-order level, minimum inventory level and maximum inventory level for the business.