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Question
The Rushton Trash Company stocks, among many other products, a certain container, each of which occupies four square feet of warehouse space. The warehouse space currently available for storing this product is limited to 600 square feet. Demand for the product is 15,000 units per year. Holding costs are $4 per container per year. Ordering costs are $5 per order.
(a) What is the cost-minimizing order quantity decision for Rushton?
(b) What is the total inventory-related cost of this decision?
(c) What is the total inventory-related cost of managing the inventory of this product, when the limited amount of warehouse space is taken into account?
(d) What would the firm be willing to pay for additional warehouse space?
Answer
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Weight Day
Package 1
Package 2
Package 3
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23
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19
20
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19
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