you are a manager for a monopolistically competitive firm. from experience, the profit-maximizing level of output of your firm i
1 answer:
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Answer:
The appropriate solution is:
(a) 2828 cases each time
(b) $4005656.85
(c) $3609800
Explanation:
The given values are:
Annual demand,
D = 200,000 cases
Per case cost,
C = $20
Carrying host,
H =
= $
Ordering cost,
S = $40
(a)
The economic order quantity will be:
⇒
On substituting the values, we get
(b)
According to the question,
The annual ordering cost will be:
=
=
= ($)
The annual carrying cost will be:
=
=
= ($)
The annual purchase cost will be:
=
=
= ($)
Now,
The total inventory cost will be:
=
= ($)
(c)
According to the question,
Order quantity,
Q = 10000 cases
Per case cost,
C = $18
Carrying cost,
H =
=
The annual ordering cost will be:
=
=
= ($)
The annual carrying cost will be:
=
=
= ($)
The annual purchase cost will be:
=
=
=
Now,
The total cost of inventory will be:
=
= ($)