Question

The Bucks Grande exhibition baseball team plays 50 weeks each year and uses an average of 350 baseballs per week. The team orders baseballs from Coopers-Town, Inc., a ball manufacturer noted for six-sigma–level consistency and high product quality. The cost to order baseballs is $100 per order and the annual holding cost per ball is 38 percent of the purchase price. Coopers-Town’s price structure is:
Order Quantity Price per Unit
1–999 ........ $7.50
1,000–4999 ...... $7.25
5,000 or more ..... $6.50
a. How many baseballs should the team buy per order?
b. What is the total annual cost associated with the best order quantity?
c. Coopers-Town, Inc., discovers that, owing to special manufacturing processes required for the Buck’s base-balls, it has underestimated the setup time required on a capacity-constrained piece of machinery. Coopers-Town adds another category to the price structure to provide an incentive for larger orders and thereby hopes to reduce the number of setups required. If the Bucks buy 15,000 baseballs or more, the price will drop to $6.25 each. Should the Bucks revise their order quantity?



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  • CreatedNovember 07, 2013
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