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:

Consistency

Consistency refers to the quality of achieving a level of performance or behavior that does not vary greatly in quality over time.

Persuader

An individual or entity that uses communication and argumentation techniques to influence others' beliefs, attitudes, or actions.

Cognitive Dissonance

A psychological phenomenon where there is discomfort or mental conflict due to holding contradictory beliefs or attitudes, leading to an internal push for resolution.

Social Judgment Theory

A theory that explains how individuals perceive and evaluate a communication message against their existing attitudes, influencing persuasion and attitude change.