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For the following three questions, consider a 10 Euro (retail price) bottle. What are the costs of having one bottle too few in inventory (underage
For the following three questions, consider a 10 Euro (retail price) bottle.
- What are the costs of having one bottle too few in inventory (underage cost)? What are the costs of having one bottle too many in inventory (overage cost)? List these costs qualitatively and attempt to attach numbers to them.
- Assume the underage cost is 3 Euro and the overage cost is 1 Euro. How many bottles would you order of a wine that is forecasted to sell 2000 bottles if your objective is to maximize profits? How do these numbers change if you use the cost numbers from your answer to Question 1?
- Assume you would like to achieve a fill rate of 98%. How would the answer to question 2 change?
- How much of each wine listed in Exhibit 2 would you order? Be prepared to explain and justify your decisions. (Anexcel file is providedDownload excel file is providedthat contains the data in Exhibit 2.)
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