Chapter 20, Problem 20.23E

EOQ for a retailer. The Fabric World sells fabrics to a wide range of Industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The supplier for the denim cloth pays all incoming freight. No incoming inspection of the denim is necessary because the supplier has a track record of delivering high-quality merchandise. The purchasing officer of the Fabric World has collected the following information:

Annual demand for denim cloth	40,700 yards
Ordering cost per purchase order	$185
Carrying cost per year	10% of purchase costs
Safety-stock requirements	None
Cost of denim cloth	$11 per yard

The purchasing lead time is 2 weeks. The Fabric World is open 220 days a year (44 weeks for 5 days a week).

1. 1. Calculate the EOQ for denim cloth.

Required

1. 2. Calculate the number of orders that will be placed each year.
2. 3. Calculate the reorder point for denim cloth.