What is the optimal lot size for the retailer

Reference no: EM131861422

Question: Crunchy, a cereal manufacturer, has dedicated a plant for one major retail chain. Sales at the retail chain average about 240,000 boxes/year and production at the plant keeps pace with this average demand. Each box of cereal costs Crunchy $3 and is sold to the retailer at a wholesale price of $5. Both Crunchy and the retailer use a holding cost of 20%. For each order placed, the retailer incurs an ordering cost of $200. Crunchy incurs the cost of transportation and loading that totals $1,000 per order shipped. What is the optimal lot size for the retailer? What is the lot size that minimizes the inventory costs (ordering, delivery, holding) across both Crunchy and the retailer? Design an all unit quantity discount that encourages the retailer to order 18,974 units/month.

Reference no: EM131861422

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