Tricolore is an apparel retailer in east Austin, TX that sells mostly tshirts and jeans. Tricolores most popular item is a cotton tshirt that comes in three colors: green, white, and red. Tricolore steadily sells about tshirts of each color per month, and holds about a week supply of inventory of each color in stock ie tshirts on average. Tricolore buys each of the three tshirts from a different supplier. All three suppliers charge Tricolore $ per tshirt ordered, but they differ in their shipment feeswhich Tricolore has to pay regardless of the size of the order. The greentshirt supplier charges a $ delivery fee, the whitetshirt supplier charges a $ delivery fee, and the redtshirt supplier charges a $ delivery fee. Tricolores cost of holding inventory is high: $ per tshirt per month.

The goal of the problem is to help Tricolore with its inventory management.

a On average, how much cost is Tricolore incurring per month for holding inventory of each color tshirt? On average, how much is Tricolore spending per month on delivery fees for each color of tshirt? Does Tricolore hold the right amount, too little, or too much inventory for each tshirt? Why?

b What order size would you recommend Tricolore adopts for each color tshirt? Under the policy you recommend, how much inventory of each color tshirt will Tricolore hold, on average?

c Tricolore was approached by a new supplier who carries all three colors. This supplier will charge Tricolore $ per delivery but can deliver all three colors together, in a single shipment. Moreover, the variable cost the $ is up for negotiation. The holding cost per unit will still be $ month. What is the absolute maximum variable price Tricolore should accept? Why?