Daily demand for a 25-gallon sport backpack is 28,000 in the U.S. The manufacturer, on average, makes $175 net profit for each backpack. The current fill rate is 55%. About 30% of their incomplete orders are back-ordered, and the rests are cancelled. The company is considering to improve the fill rate to 75% whose estimated daily additional operating cost (e.g., improving the warehousing and transportation) is $370,000. 

What should be the minimum back-order cost to make this investment reasonable?

Answer rating: 100% (QA)

The current net profit per backpack is 175 With a fill rate of 55 theyre not selling 45 of the b... View the full answer