Using JIT to minimize waste and lost opportunity Kim Weston, a teacher at Reid Middle School, is in charge of ordering the T-shirts to be sold for the school’s annual fund-raising project. The T-shirts are printed with a special Reid School logo. In some years, the supply of T-shirts has been insufficient to satisfy the number of sales orders. In other years, T-shirts have been left over. Excess T-shirts are normally donated to some charitable organization. T-shirts cost the school $4 each and are normally sold for $6 each. Ms. Weston has decided to order 500 shirts.

Required

a. If the school receives actual sales orders for 450 shirts, what amount of profit will the school earn?

What is the cost of waste due to excess inventory?

b. If the school receives actual sales orders for 550 shirts, what amount of profit will the school earn?

What amount of opportunity cost will the school incur?

c. Explain how a JIT inventory system could maximize profitability by eliminating waste and opportunity cost.