Jawo owns a fish shop in Tanji where he sells an exotic variety of tuna fish which he imports from Senegal. Jawo refrigerates the fish in a cold storage facility near his shop that charges him a fixed...

Jawo owns a fish shop in Tanji where he sells an exotic variety of tuna fish which he imports from Senegal.

Jawo 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, Jawo brings fish from the cold storage to his shop for sale. Jawo estimates that he incurs $10,000 electricity cost each year on refrigerating the fish inside his own shop.

Jawo 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

Jawo currently imports fish by placing one order of 20 cartons every month. Each carton costs $2,000.

Jawo 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