A retailer supplies two of his products (A and B) from a single supplier. He thinks that rather than ordering these two products separately (in this case he would pay the fixed cost S for two products separately) he might follow a combined strategy in which he places the orders for 2 products at the same time. This way he would only pay S for the order of two joint products. The information regarding annual demand and unit costs are given in the following table:
|
Product
|
Annual demand (D)
|
Unit Cost (c)
|
|
A
|
2000
|
$8
|
|
B
|
4500
|
$2
|
Find the optimal order quantities for the joint order policy and calculate the total cost of this policy