Question: Average demand = 5 0 bags / day . Each bag cost $ 5 . 0 0 to buy from his distributor. Tom sells the

Average demand =50 bags/day.
Each bag cost $5.00 to buy from his distributor.
Tom sells the bags for $10.00 each.
Each time he places an order for snacks, his distributor charges him a $100 flat shipment rate. Tom
figures that the time it takes for one of his workers to determine how many snack bags to order and
then put the bags on the shelves to be 45 minutes per order. His junior workers earn $20/hour
(including fringe costs such as taxes and vacation).
The holding rate on property near McCombs is high at 30% because space there is very expensive.
Toms shop is open 7 days/week,365 days/year.Tom also sells 50 bags of wavy potato chips per day, which have the same price
and cost structure. He notices that his customers seem indifferent between the
regular and wavy potato chips. So, he thinks that he could take care of both his
regular potato chip customers AND his wavy potato chip customers by stocking
only regular potato chips. (This would raise demand for regular potato chips to
100 bags per day.) If Tom does this, what would his new order quantity be?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related General Management Questions!