Dominic’s supermarket chain sells Nut Flakes, a popular cereal manufactured by theTastee cereal company. Demand for Nut Flakes is 600 boxes per week. Dominick’s has aholding cost of 20 percent and incurs a fixed trucking cost of $225 for each replenishment order itplaces with Tastee.
(a) Given that Tastee normally charges $2.4 per box of Nut Flakes, how much should Dominick’s order in each replenishment lot?
(b) Tastee runs a trade promotion, lowering the price of Nut Flakes to $2.25 for a month. How much should Dominick’s order be, given the short-term price reduction?