The Western Jeans Company purchases denim from Cumberland Textile Mills. The Western Jeans Company uses 35,000 yards of denim per year (365 days) to make jeans. The cost of ordering denim from the textile company is $500 per order. The carrying cost per yard of denim (Ch = H*C=0.29*1.20) is $0.35 per yard annually to hold a yard of denim in inventory. Now, assume Western Jeans Company's inventory carrying cost per yard of denim is 29% of the price per yard and the price of denim from the Cumberland Textile Mills is $1.20 per yard. Now suppose textile mill will give discounted price of $1.10 per yard if it purchases 20,000 yards, $1.00 per yard if it purchases 50,000 yards, and $0.90 per yard if it purchases 70,000 yards per order. What should be the order quantity? Select one:
The Western Jeans Company purchases denim from Cumberland Textile Mills. The Western Jeans Company uses 35,000 yards of denim per year (365 days) to make jeans. The cost of ordering denim from the textile company is $500 per order. The carrying cost per yard of denim (Ch = H*C=0.29*1.20) is $0.35 per yard annually to hold a yard of denim in inventory. Now, assume Western Jeans Company's inventory carrying cost per yard of denim is 29% of the price per yard and the price of denim from the Cumberland Textile Mills is $1.20 per yard. Now suppose textile mill will give discounted price of $1.10 per yard if it purchases 20,000 yards, $1.00 per yard if it purchases 50,000 yards, and $0.90 per yard if it purchases 70,000 yards per order. What should be the order quantity? Select one:
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The Western Jeans Company purchases denim from Cumberland Textile
Mills.
The Western Jeans Company uses 35,000 yards of denim per year (365 days)
to
make jeans. The cost of ordering denim from the textile company is $500 per
order.
The carrying cost per yard of denim (Ch = H*C=0.29*1.20) is $0.35 per yard
annually to hold a yard of denim in inventory.
Now, assume Western Jeans Company's inventory carrying cost per yard of
denim is
29% of the price per yard and the price of denim from the Cumberland
Textile Mills is
$1.20 per yard. Now suppose textile mill will give discounted price of $1.10
per yard if it
purchases 20,000 yards, $1.00 per yard if it purchases 50,000 yards, and
$0.90 per yard
if it purchases 70,000 yards per order.
What should be the order quantity?
Select one:
a. 20,000 yards
b. 30,000 yards
c. 50,000 yards
d. 70,000 yards
Assuming the same all-unit-discount prices as
above,
what price per yard it should buy denim for?
Select one:
a. $1.20
b. $1.00
c. $0.90
Transcribed Image Text:Assuming the same all-unit-discount prices as
above,
what price per yard it should buy denim for?
Select one:
a. $1.20
b. $1.00
c. $0.90
d. $1.05
Assuming the same all-unit-discount prices as above,
how much cost Western Jeans Company would
reduce with
best discount policy versus not taking any discount?
Select one:
a. $4,605
b. $0
c. $2,925
d. $2,890
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