Order-Filling Costs and Minimum Order Size The Independent Wholesale Drug Co. has made a time study of the cost of filling orders, with the following results:

SIZE OF ORDERS AVERAGE TIME IN DOLLARS REQUIRED .00 to 2.00 10 hour 2.01 to 5.00 12 hour 5.01 to 15.00 .16 hour 15.01 to 25.00 .20 hour Over 25.00 .25 hour Order-filling costs totaled $4,480 for the month in which the study was made, and 1,600 man-hours were worked in the Order-Filling Department.
During the same period, the costs of receiving orders and of billing and post-ing the customers’ accounts were calculated at a minimum of 16¢ per order. Gross margin (profit) on the company’s merchandise averages 20 percent. Ignoring all considerations other than these cost data, should the company adopt a rule that it will accept orders only above some minimum size? If SO, what minimum order size would you recommend? lop5