Answer Happy

A tourist shop buys postcards from its supplier using the EOQ model. The shop faces a demand of 300 cards per month, he holding cost per postcard per month is 5% of the purchase price, and the fixed cost is $4 per order. The shop buys postcards at $0.30 per unit. Also, the supplier offers all-unit quantity discounts: if the order quantity is at least 600, then the shop can purchase postcards at $0.29 per unit; and if the order quantity is at least 1500, then the shop can purchase postcards at $0.28 per unit. (a) (15 points) What is the shop's optimal order quantity? (b) (5 points) Suppose that there is an order lead time of 26 of a year. Based on your answer to part (a), what is the reorder point (in terms of remaining inventory)?