NoGap Inc. orders plain white t-shirts from its supplier in Europe. The item purchase cost for each plain white t-shirt is $10. The order cost is $250/order and the annual holding cost per item amounts to 33% of the purchase cost of each t-shirt. The holding costs for NoGap arise from the opportunity cost of the capital tied up in inventory.

Assumer that the annual demand for plain white t-shirts is 25,750. Further, since the supplier is in Europe. The lead time is 3 weeks. Assume that a year has 50 weeks.

21) What is the optimal order quantity for NoGap?

22) What is the optimal re-order point?

23) Suppose that noGap pays for the plain white t-shirts upon shipment i.e. NoGap pays and owns the inventory the moment they are shipped from the European suppleir. Then determine the annual holding costs using the order quantitity and re-order poing obtained above.

24) Suppose instead that NoGap pays for the plain white t-shirts only upon receipt of the t-shirts. i.e. NoGap pays and owns the inventory only after it receives the shipments in its Canadian warehouse. The, compute the annual holding costs using the order quantity and re-order point obtained above.