Question: A retailer estimates her fixed cost for placing an order
A retailer estimates her fixed cost for placing an order at $ 1,000. Currently, she orders in optimal quantities of 400 units. She has, however, heard of the benefits of just- in- time purchasing— a principle that advocates purchasing goods in smaller lots as a means of keeping inventory down. To do so, she needs to reduce her fixed order costs. What should her fixed ordering costs be if she wishes her order size to be no larger than 50?
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