Question: CCC is considering centralizing purchasing for all four outlets by setting up a centralized IT system that links order transaction records of all outlets. With
CCC is considering centralizing purchasing for all four outlets by setting up a centralized IT system that links order transaction records of all outlets. With this new system, the CCC headquarters will place orders with the supplier of DDD on behalf of all outlets. The supplier will split each order equally into four parts and ship each part to individual retail outlets. This new operation will increase the fixed cost of ordering to $1,800. In addition, CCC will incur an additional cost of $20,000 per year for maintaining the new IT system. (One-time setup cost for the IT system is sunk and can be ignored.) Other aspects of the operation do not change. 7. What is CCC headquarters' optimal order quantity under the centralization proposal? 8. Based strictly on cost comparison, should CCC go ahead with the centralization proposal? Justify your answer with calculations
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