my textbook has a chapter 12 but i dont see a one listed in the homework section

Question

my textbook has a chapter 12 but i dont see a one listed in the homework section. need help with

Managerial Decision Making, Chapter 12 question 12-18. solve for carry cost.

Shoes R us has a demand for 1000 sandals, has a habit of ordering 200 pairs at a time. Estimated order cost is $20 per order and the cost is $10 per pair.

A. for ordering to be correct, what would the carry cost have to be as a percentage of the unit cost?

B. if the carry cost were 20% of the unit cost, what would the optimal order quantity?

Explanation / Answer

b. EOQ = (2*F*D)/C

C=Carrying cost per unit of inventory

Q=Inventory order size (quantity)

D=Total demand (units) = 1000 sandals

F=Fixed cost per order = $20 per order

Given carrying cost is 20% of unit cost.

Carrying cost = (20 * 10) / 100 = $2 per unit.

Optimal order quantity = (2*F*D)/C

= (2*20*1000)/2

= 141.42

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