Best Buy is concerned about its inventory of Sony Magnolia 85” 4K Ultra HD TVs. It wants to have at least 3,000 TVs available at a given time. It costs the firm $20 to place an order. It sells 50,000 TVs a year and it costs $20 in storage/insurance per TV per year.How many TVs should Best Buy order at a time?
Best Buy is concerned about its inventory of Sony Magnolia 85” 4K Ultra HD TVs. It wants to have at least 3,000 TVs available at a given time. It costs the firm $20 to place an order. It sells 50,000 TVs a year and it costs $20 in storage/insurance per TV per year.How many TVs should Best Buy order at a time?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Best Buy is concerned about its inventory of Sony Magnolia 85” 4K Ultra HD TVs. It wants to have at least 3,000 TVs available at a given time. It costs the firm $20 to place an order. It sells 50,000 TVs a year and it costs $20 in storage/insurance per TV per year.How many TVs should Best Buy order at a time?
Expert Solution
Step 1
Given
Ordering cost Co=$20/order
Demand D=50000 TVs/year
Holding cost Ch=$20/TV/year
Minimum stock = 3000 TVs
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