Ann Chovies, owner of the Perfect Pasta Pizza Parlor, uses 20 pounds of pepperoni each day in preparing pizzas. Order costs for pepperoni are $10.00 per order, and carrying costs are 4 cents per pound per day. Lead time for each order is three days, and the pepperoni itself costs $3.00 per pound. If she were to order 80 pounds of pepperoni at a time, what would be theaverage total daily costs, including the cost of the pepperoni?

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Quizplus · Accepted Answer

The average total daily cost includes the cost of the pepperoni, ordering costs, and carrying costs. The daily cost of pepperoni is 20 pounds * $3.00 = $60.00. The ordering cost per day is ($10.00 per order / 80 pounds per order) * 20 pounds per day = $2.50. The carrying cost per day is (80 pounds / 2) * $0.04 = $1.60. Adding these gives $60.00 + $2.50 + $1.60 = $64.10.

Ann Chovies, Owner of the Perfect Pasta Pizza Parlor, Uses