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Garden Variety Flower Shop employs 760 clay pots a month. The pots are purchased at $2 each. Annual carrying costs per pot are estimated to be 30 percent of cost, and ordering costs are $20 per order. The manager has been using an order size of 1,500 flower pots.

a. What additional annual cost is shop incurring by staying with this order size?

b. Other than cost savings, what benefit would by using optimal order quantity yield?

Operation Management, Management Studies

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