Vostick Filter Company is a distributor of air filters to retail stores. It buys its filters from
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Question:
Vostick Filter Company is a distributor of air filters to retail stores. It buys its filters from several manufacturers. Filters are ordered in lot sizes of 1,000, and each order costs $40 to place. Demand from retail stores is 20,000 filters per month, and carrying cost is $0.10 a filter per month.
a. What is the optimal order quantity with respect to so many lot sizes (that is, what multiple of 1,000 units should be ordered)?
b. What would be the optimal order quantity if the carrying cost were cut in half to $0.05 a filter per month?
c. What would be the optimal order quantity if ordering costs were reduced to $10 per order?
Related Book For
Intermediate Accounting Volume 1
ISBN: 9781260306743
7th Edition
Authors: Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod Dick
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