Shawns Fun T-shirts

Shawn is considering ordering printed t-shirts. A t-shirt will cost $10 each if ordered in quantities of 500 units. The annual demand is 5200 units, carrying costs are 20% of the units value per period, and the cost of placing an order (setup of the print screens) is $50.

Part 1: On your spreadsheet, calculate.

a) Average inventory

b) Number of orders placed during the year

c) Annual inventory carrying cost

d) Annual ordering cost

e) Annual total cost

Part 2: Now if Shawn orders the t-shirts in quantities of 1000 units, the price drops to $9 each. Calculate the above costs again and discuss the results.

Part 3: If order size is not an issue, what is the Economic Order Quantity for the t-shirts if they cost $10 each?

Shawn's Fun T-shirts Part 1 and 2 Cost per unit Annual Demand units Carry Cost unit Set-up Cost per order a) Average Inventory b) of orders/year c) Annual Inventory Holding Cost d) Annual Order Cost e) Total Annual Cost Part 3 EOQ Quantity 500 1000 $9.00 $10.00 5200 5200 20% 20% S50.00 $50.00