Bsop434 Lab 1 Answers Essay

1009 Words Sep 8th, 2012 5 Pages
Lab 1: Low Nail Company

|Scenario/Summary |

After making some wise short-term investments at a race track, Chris Low had some additional cash to invest in a business. The most promising opportunity at the time was in building supplies, so Low bought a business that specialized in sales of one size of nail. The annual volume of nails was 2,000 kegs, and they were sold to retail customers in an even flow. Low was uncertain of how many nails to order at any time. Initially, only two costs concerned him: order-processing costs, which were $60 per order without regard to size, and warehousing costs, which were $1
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Assume that Low’s warehouse offers to rent Low space on the basis of the average number of kegs that Low will have in stock, rather than on the maximum number of kegs that Low would need room for whenever a new shipment arrived. The storage charge per keg remains the same. Does this change the answer to Question 1? If so, what is the new answer?

|Orders/Year |Order size |Processing costs |Warehousing costs |Sum of processing and |
| | | | |warehousing costs ($) |
|1 |2000 |60 |1000 |1060 |
|2 |1000 |120 |500 |620 |
|3 |667 |180 |334 |524 |

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