The campus bookstore sells 4,000 sets of graduation regalia each year. Placing an order from their supplier costs $25 regardless of order quantity, so they usually place a large order (a half year's supply) at a time
It costs $5 per year to hold a cap and gown in inventory, primarily insurance costs for the highly flammable material. What is the difference in their holding cost if they order at their optimal order quantity compared to their current policy?
What will be an ideal response?
Answer: Their optimal order quantity is:
Q* = = 200
The total cost at an optimal order quantity is
TC* = + = $1000
Their cost of ordering 2000 cap and gown sets at a time is
TC* = + = $5050
which is a difference of $4050.
You might also like to view...
The last step in the preparation of a 10-column work sheet for a manufacturing company is the preparation of the adjusted trial balance
Indicate whether the statement is true or false
"Variable costs are relevant and fixed costs are irrelevant.". Explain why you agree or disagree with this statement
Which of the following is described as conflict that engenders strong emotions such as anger or disgust?
A. supervisory conflict B. process conflict C. affective conflict D. substantive conflict
Ellipses consist of three _________________
a. question marks b. commas c. dashes d. periods