Shop incurring by staying with this order size

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Reference no: EM131156541

Garden Variety Flower Shop uses 870 clay pots a month. The pots are purchased at $3.60 each. Annual carrying costs per pot are estimated to be 40 percent of cost, and ordering costs are $25 per order. The manager has been using an order size of 1,250 flower pots.

a. What additional annual cost is the shop incurring by staying with this order size?

b. Other than cost savings, what benefit would using the optimal order quantity yield (relative to the order size of 1,250)?

Reference no: EM131156541

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