What is the cost of waste due to excess inventory

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Reference no: EM131217251

Kate Connor, a teacher at Meadow Middle School, is in charge of ordering the T-shirts to be sold for the school’s annual fund-raising project. The T-shirts are printed with a special Meadow School logo. In some years, the supply of T-shirts has been insufficient to satisfy the number of sales orders. In other years, T-shirts have been left over. Excess T-shirts are normally donated to some charitable organization. T-shirts cost the school $7 each and are normally sold for $14 each. Ms. Connor has decided to order 860 shirts.

Required:

a. If the school receives actual sales orders for 780 shirts, what amount of profit will the school earn? What is the cost of waste due to excess inventory?

Profit

Waste due to excess inventory

b. If the school receives actual sales orders for 880 shirts, what amount of profit will the school earn? What amount of opportunity cost will the school incur?

Profit

Opportunity cost

Reference no: EM131217251

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