Question
Brighton Organic Products Cooperative (BOPC) sells health-oriented food products. One of the products it sells in its single store is Corporeal Crunch (CC), a custom
Brighton Organic Products Cooperative (BOPC) sells health-oriented food products. One of the products it sells in its single store is Corporeal Crunch (CC), a custom blended organic breakfast cereal mix. BOPC buys CC for $3.35 per bag from a plant in North Carolina, and sells the bags for $5.67 per bag in its store. Shipping the bags from the supplier to the Brighton store costs $0.36 per bag, plus a fixed charge of $45 per shipment. Inventory carrying costs are 2.3% of the value of the inventory per week. Demand for CC tends to be a relatively constant 730 bags per week.
Currently, BOPC orders 1,400 bags of CC at a time.
A) How much holding cost does BOPC incur on average per week for the CC inventory it carries?
B) How much does BOPC pay for fixed ordering cost per week on average?
C) What will be BOPC's average weekly operating profit on CC?
D) What is the profit maximizing order quantity?
E) How much will profit increase if BOPC uses the order quantity you found in part d instead of the 1,400 bags used in parts a-c?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started