A clothing store in No Stop, Wyoming purchases men\'s dress slacks from a vendor

Question

A clothing store in No Stop, Wyoming purchases men's dress slacks from a vendor. The vendor sells the dress slacks to the clothing store for $24.25 a piece. The cost to the clothing store for placing an order is $12, and the carrying cost is 15% of the purchase price. The clothing store manager estimates that 2,700 dress slacks will be sold during the year. The vendor has offered the clothing store the following volume discount schedule:

The clothing store's manager wants to determine the clothing store's optimal order quantity, given the foregoing quantity discount information.

1. Determine carrying cost as a percentage of purchase price.

2. Calculate EOQ for each discount price

3. Calculate TC for each EOQ

4. What is the clothing's optimal order quantity?

Order Size Discount % Price Carrying Cost (IC) 0-99 0% 100-199 2% 200-299 3% 300 and over 4%

Explanation / Answer

Answer:

1.

2. EOQ = SQRT((2*demand*ordering cost) / carrying cost)

here ordering cost = $12 for each four carrying costs.

therefore

3. Total cost for each EOQ will be equal to:

TC = D/Q * Ordering cost + Q/2 * carrying cost

Therefore for each carrying cost TC will be equal to:

4. So the optimal order quantity = 134.82 units

Order Size Discount % Price Carrying Cost (IC) 0-99 0% $24.25 $3.64 100-199 2% $23.77 $3.56 200-299 3% $23.52 $3.53 300 and over 4% $23.28 $3.49 Price right now = $24.25 Carrying cost =15%

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.