Question: A large distributor has 4 retail outlets. Currently, each outlet manages its ordering independently. Demand at each retail outlet averages 800 per day. Assume there

A large distributor has 4 retail outlets. Currently, each outlet manages its ordering independently. Demand at each retail outlet averages 800 per day. Assume there are 250 days per year. Each unit of product costs 100 dollars, and the holding cost per unit of product per year is 10% of the product cost. The fixed cost of each order (administrative plus transportation) is 800 dollars in the decentralized system. The fixed cost of each order in the centralized system is twice of the decentralized system. Holding cost per unit are the same in the two systems.

1. How much should ALL the warehouses order together to minimize the total cost in the CENTRALIZED system?

The potential answers are: A: 15811 units. B: 14606 units. C: 17321 units. D: 19365 units. E: 16000 units.

2. How much does EACH warehouse need to order individually to minimize the total cost in the DECENTRALIZED system?

The potential answers are: A: 5590 units. B: 5164 units. C: 6124 units. D: 5657 units. E: 3953 units.

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