Free Shoes for Kids is a shoe manufacturing company with a heart. The firm originated five years ago when its founder saw that many children around the world had to go barefoot as shoes were either not available or cost-prohibitive to obtain. As such, the founder decided to establish a shoe manufacturing, distribution and retail sales firm. The commercial side of this business supports the real desire to help the needy children have a pair of shoes to wear. The firm’s position is that for every pair of shoes they sell, it will give one pair to a needy child. To achieve this objective, the company must contain its costs and achieve the highest level of efficiencies.
Since the firm started, its offices, manufacturing facilities, and retail outlets have been concentrated in United States. As the needy children are global in nature, the firm’s founder is trying to decide if it could establish a second manufacturing and distribution center in the Pacific Rim. The Pacific Rim distribution center would focus its attention on needs within this geographic region while the US location would focus its attention on the rest of the Global need.
The firm has acknowledged that the true demand is beyond its ability to meet in any single year. Thus, they must limit the number of shoes that go the needy children to the number of shoes that are sold. The following table identifies the number of shoes that have been sold since the firm was formed.
YEAR SHOES SOLD
2005 43,280
2006 68,750
2007 155,200
2008 189,750
2009 256,080
2010 369,500

To establish the Pacific Rim location, the founder needs to identify the optimal order quantity for the 2011 forecasted demand. They believe a linear regression forecast will provide an adequate prediction.
The major product that they must order is the material for the rubberized shoe sole. This material comes in 9 m₂ square sheets, each sheet can be used to produce 35 shoes. Each sheet costs $15.00 and each order costs the firm $25.00. Inventory costs are held to the lowest possible with an estimated annual cost of $0.35 per sheet. The firm only works five days a week for all 52 weeks of the year. The material supplier says they can deliver the material to any major Pacific Rim city in 25 days.
a. What is the 2011 forecast ?
b. What accuracy does this forecast have?
c. What is the optimal order quantity for the sheet of shoe material?
d. What is the total inventory cost for this item?
e. What is the reorder point?
f. How often are the orders placed?
g. How many orders should be placed a year?