Walmart buys each bottle of Tylenol for $3.00. Walmart sells 624 bottles through a store every year
Question:
Walmart buys each bottle of Tylenol for $3.00. Walmart sells 624 bottles through a store every year and demand is relatively constant throughout the year. Walmart can place orders for more Tylenol whenever it wants. However, each order costs Walmart a fixed $6 no matter the quantity ordered. This $6 represents the costs related to the processing of the order and stocking the product on the shelf (which does not depend on the amount actually stocked). The other relevant cost is the holding cost of inventory. Walmart believes that it incurs a 25 percent inventory holding cost per year.
How many bottles of Tylenol should Walmart order, and when?
Management Accounting Information for Decision-Making and Strategy Execution
ISBN: 978-0137024971
6th Edition
Authors: Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young