MakeWatch (MW) manufactures the TagMe wristwatches that RightTime (RT) sells to its customers. MW has recently installed a computer software that enables its customers to conduct “one-stop” purchasing using state-ofthe- art Web site technology. RT’s ordering cost per purchase order will be $50 using this new technology.

Required

1. Calculate the EOQ for the TagMe wristwatches using the revised ordering cost of $50 per purchase order. Assume all other data from Exercise 21-21 are the same. Comment on the result.
2. Suppose MW proposes to “assist” RT by allowing RT customers to order directly from the MW Web site. MW would ship their product directly to these customers. MW would pay $20 to RT for every TagMe watch purchased by one of RT’s customers. Comment qualitatively on how this offer will affect inventory management at RT. What factors should RT consider while deciding whether to accept MW’s proposal?