20-16 Economic order quantity for retailer. Fan Base (FB) operates a 20-16 Economic order quantity for retailer. Fan Ba

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20-16 Economic order quantity for retailer. Fan Base (FB) operates a megastore featuring sports
merchandise. It uses an EOQ decision model to make inventory decisions. It is now considering
inventory decisions for its Los Angeles Galaxy soccer jerseys product line. This is a highly
popular item. Data for 2013 are as follows:

Expected annual demand for Galaxy

10,000

jerseys

Ordering cost per purchase order

Carrying cost per year

$200

$7 per
jersey

Each jersey costs FB $40 and sells for $80. The $7 carrying cost per jersey per year consists of
the required return on investment of $4.80 (12% × $40 purchase price) plus $2.20 in relevant
insurance, handling, and storage costs. The purchasing lead time is 7 days. FB is open 365 days
a year.
Required