Cost of Prediction Error-Economic Order Quantity Model: Off The Rack, a clothing manufacturer, estimated the following components
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Cost of Prediction Error-Economic Order Quantity Model: Off The Rack, a clothing manufacturer, estimated the following components for determining economic order quantities for sweaters:
Based on this information, the company ordered in lots of 25,495 units. After reviewing the data for the year, management concluded that storage costs should have been increased to $8 per unit.
Required: What is the cost of prediction error?
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