Tastee Mart sells Frostee Flakes.Demand for Frostee Flakes is 500 boxes per week.Tastee Mart has a holding cost of 30 percent and incurs a fixed cost of $100 for each replenishment order it places for Frostee Flakes.Given that cost is $2 per box of Frostee Flakes,how much should Tastee Mart order in each replenishment lot? If a trade promotion lowers the price of Frostee Flakes to $1.80 for a month,how much should Tastee Mart order given the short-term price reduction?

Question

Gabriela Resendez · Accepted Answer

Final Answer :  Q* = 2 D S / h C \sqrt { 2 D S / h C } 2 D S / h C ​   = ( 2 ( 500 × 52 × 5 ) $ 100 ) / ( . 3 × 2 ) \sqrt { ( 2 ( 500 	imes 52 	imes 5 ) \$ 100 ) / ( .3 	imes 2 ) } ( 2 ( 500 × 52 × 5 ) $100 ) / ( .3 × 2 ) ​   = 2943.92 ≈ 2944Qd = (dD)/(C - d)h + CQ*/(C - d)= (.2 × 26,000)/(2 - .2).3 + (2 × 2944)/(2 - .2)= 12,900.74 ≈ 12,901Forward buy = Qd - Q*= 12,901 - 2944= 9,957

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