a) Calculate the current annual total inventory costs b) Calculate the economic order quantity c) Calculate the annual total inventory costs if EOQ is used
Jason owns a fish shop where he sells an exotic variety of tuna fish which he imports from Japan.
Jason refrigerates the fish in a cold storage facility near his shop that charges him a fixed annual fee of $1000 and variable charge of $5 per day for each fish container that is stored.
Every morning, Jason brings fish from the cold storage to his shop for sale. Jason estimates that he incurs $10,000 electricity cost each year on refrigerating the fish inside his own shop.
Jason incurs the following ordering costs:
Delivery charges of $10,000 per delivery
Import duties of $300 per carton
Custom fees of $200 per order
Import license fee of $150 per annum
Jason currently imports fish by placing one order of 20 cartons every month. Each carton costs $2,000.
Jason is wondering if he can save inventory costs by adopting EOQ model.
a) Calculate the current annual total inventory costs
b) Calculate the economic order quantity
c) Calculate the annual total inventory costs if EOQ is used
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