The Rushton Trash Company Stocks, Among Many Other Products, a Certain

question 65

Essay

The Rushton Trash Company stocks, among many other products, a certain container, each of which occupies four square feet of warehouse space. The warehouse space currently available for storing this product is limited to 600 square feet. Demand for the product is 15,000 units per year. Holding costs are $4 per container per year. Ordering costs are $5 per order.
(a) What is the cost-minimizing order quantity decision for Rushton?
(b) What is the total inventory-related cost of this decision?
(c) What is the total inventory-related cost of managing the inventory of this product, when the limited amount of warehouse space is taken into account?
(d) What would the firm be willing to pay for additional warehouse space?

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Definitions:

Spring Break Vacations

Holiday periods typically occurring in early spring where students and families often travel for leisure and relaxation, commonly to warm or tropical destinations.

Specific Brand

A particular brand that is distinguished by its unique identity, product offerings, and market position.

Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity demanded by consumers at those prices.

Price and Demand

An economic principle stating that the demand for a product inversely varies with its price; as the price increases, demand usually decreases.