LAMA Creations Creates Sweaters Using the Wool of the Llama

question 18

Multiple Choice

LAMA Creations creates sweaters using the wool of the Llama. The wool used in the manufacturing process is ordered by the bundle. LAMA requires 1,200 bundles of Llama wool per year and places orders of 100 bundles at a time. The cost of ordering is $80.00 per order and the carrying cost per bundle is $3.50. LAMA Creations can take advantage of a quantity discounts of $3.00 per bundle if they order in lots of 500 bundles or more. What is the opportunity cost of ordering at EOQ level.

• A) $3,600.00
• B) $1,500.00
• C) $1,035.00
• D) $500.00

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Definitions:

Points-Of-Difference

Unique attributes or benefits of a product, service, or brand that set it apart from its competitors in the eyes of the target market.

CVP

Stands for Cost-Volume-Profit analysis, a tool used by businesses to determine how changes in costs and volume affect a company's operating income and net income.

All-Benefits

A type of value proposition that involves identifying and promoting all the benefits of a product or service to customer segments, with little regard for the competition or any real insight into what the customer really wants or needs.

Suppliers

Entities that provide goods or services to other entities, typically within a supply chain or business context.