Question
With a fixed cost of $100 per order, Nathan decided it was vital to get his money's worth. His monthly demand for energy drinks
With a fixed cost of $100 per order, Nathan decided it was vital to get his money's worth. His monthly demand for energy drinks was 10,000 bottles and holding cost was estimated at 20% of unit cost. The mail order company offered him a couple of possibilities - he could pay $4.00 per bottle for orders of up to 10,000 bottles. After that threshold, he would pay only $3.98 per bottle, and if he ordered 20,000 or more bottles in an order, he would pay only $3.96 per bottle. 1) What is the best order quantity for Nathan to use? 2) What is the best total cost that Nathan can incur?
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Microeconomics
Authors: Douglas Bernheim, Michael Whinston
2nd edition
73375853, 978-0073375854
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