Chapter 1 – Question 8
Made to Stock
Average Inventory = Order Quantity/2 = 500/2 = 250
Inventory Holding Cost = Average Inventory*Unit Holding Rate = 250*$50 = $12,500
Made to Order
Discount = 5000*$5*52 = $1,300,000
Answer – The cost under Made to Stock is less. It is better to produce to stock rather than
produce to order.
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Leanne Heilemann
BUS 384
SLN 27153
01/15/19
