Panda Express orders chopsticks from its supplier. Their customers require 100sets of chopsticks per day, on average, for a total of 36500 in a year. Each order costs $35in shipping and processing and takes 3 days to arrive. Each set of chopsticks costs $0.10and the holding/carrying costs average 40% of the unit cost per year (there is a high rateof “theft” via customers taking extra chopsticks home).
a. Assuming no variability in demand or replenishment, when should Panda Express order more chopsticks?
b. If Panda Express decides to order 10,000 chopsticks at a time, what are theannual total acquisition costs (TAC)? Show your work.
c. If Panda Express could work with its supplier to decrease the order cost, wouldthe optimal order quantity increase or decrease? Why?