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Question
A retailer estimates her unit cost to place an order (S) at $1,400 (← if a comma appears, interpret it as a thousand separator). Currently, she orders in optimal quantities of 400 units (QÉC = 400). She has, however, heard of the benefits of just-in-time purchasing, a principle that advocates purchasing goods in smaller batches to reduce inventory and its warehousing costs.
If she ordered in smaller batches, she would have to place more orders to meet the demand. And if she were to place more orders, she would have to reduce her value of S in order to preserve the minimum cost. What should her new S be if she was aiming for an optimal order size of 50 units?
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