question archive Which of the following is true?    The "NEW" Boxes-for-Ever company is following the OLD contract in which they are paying a large shipping cost of $2000 per shipment (independent of the number of boxes shipped)

Which of the following is true?    The "NEW" Boxes-for-Ever company is following the OLD contract in which they are paying a large shipping cost of $2000 per shipment (independent of the number of boxes shipped)

Subject:ManagementPrice: Bought3

Which of the following is true? 

 

The "NEW" Boxes-for-Ever company is following the OLD contract in which they are paying a large shipping cost of $2000 per shipment (independent of the number of boxes shipped). The annual holding cost is $10 per item. A new shipping company offers a NEW contract in which they charge only $500 per shipment, but they will charge an annual holding cost of $2.50 per item. Considering only shipping and holding cost, in which contract will the optimal order quantity be larger?

 

a.     In the OLD contract the optimal order size will be larger 

b.    In the NEW contract the optimal order size will be larger 

c.     The optimal order size in both contract OLD and NEW will be identical

d.    It depends.  To answer this question, we need to know what the annual demand is.    

e.     There is not enough data to answer the question 

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