question archive A retail store purchases computer software from a distributor for resale
A retail store purchases computer software from a distributor for resale
Subject:Operations ManagementPrice:2.87 Bought7
A retail store purchases computer software from a distributor for resale. For an upcoming promotion, the retailer needs to determine the best order size for a one-time purchase. One of the products is a word processing software program that will have a special sale price of $350. The program can be purchased from the distributor for $250 each. If the program has leftover inventory, the retail store can return it to the distributor and get only $100 back per copy.
1. What are the respective unit underage (understocking) cost and overage (overstocking) cost for the retail store?
Question 2 options:pick one
| a) |
Underage cost is $100/unit, Overage cost is $150/unit |
| b) |
Underage cost is $150/unit, Overage cost is $150/unit |
| c) |
Underage cost is $250/unit, Overage cost is $100/unit |
| d) |
Underage cost is $350/unit, Overage cost is $100/unit |
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Answer:
1. Cost price (Cp) = $250
Selling price (SP) = $350
Salvage value (V) = $100
Underage cost = SP-Cp = $350-$250 = $100
Overage cost = Cp-V = $250-$100 = $150
2. So the answer is option a
