A college bookstore is attempting to determine the optimal order quantity for a popular book on…

A college bookstore is attempting to determine the
optimal order quantity for a popular book on psychology. The store sells 5,000
copies of this book a year at a retail price of $12.50, and the cost to the
store is 20 percent less, which represents the discount from the publisher. The
store figures that it costs $1 per year to carry a book in inventory and $100
to prepare an order for new books.

a. Determine the total inventory costs associated
with ordering 1, 2, 5, 10, and 20 times a year.

b. Determine the economic order quantity.

c. What implicit assumptions are being made about

A college bookstore is attempting to determine the
optimal order quantity for a popular book on psychology. The store sells 5,000
copies of this book a year at a retail price of $12.50, and the cost to the
store is 20 percent less, which represents the discount from the publisher. The
store figures that it costs $1 per year to carry a book in inventory and $100
to prepare an order for new books.

a. Determine the total inventory costs associated
with ordering 1, 2, 5, 10, and 20 times a year.

b. Determine the economic order quantity.

c. What implicit assumptions are being made about
the annual sales rate?

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