Inventory Management

ABC Furniture sells 2,400 sofas a year at an average price per sofa of $1,250. The carrying cost per unit is $11.60. The company orders 80 sofas at a time and has a fixed order cost of $52 per order. The sofas are sold out before they are restocked.

1. What are the total number of orders in a year?
2. What is the total carrying cost?
3. What is the total restocking cost? Note: restocking cost is same as shortage cost.
4. What are the total costs?
5. Should the company increase or decrease its number of orders and the quantity it orders each time?
6. What is the economic order quantity (EOQ)?
7. How many orders will company place if it follows the EOQ model?
8. What are the total carrying costs if the company follows the EOQ model?
9. What are the total shortage costs if the company follows the EOQ model?
10. What are the total costs if the company follows the EOQ model?

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