MM255 - Unit 2
Similar Examples (not all problems from the project have a similar example listed
below):
Henry’s hotdog shack sells 10 cases of hotdogs each week. Each case of hotdogs is made of 180
hotdogs. This week the owner goes on vacation, his assistant manager, Ken, is in charge. A
salesperson comes by the shack and asks Ken the following questions.
How much do you pay for each hotdog you sell? $.35/hot dogs
How would you feel if I offered you a deal to pay $0.10/hot dog now and a reduce rate of
$0.15 per hotdog thereafter?
The assistant manager says, “go on, tell me more.” The salesperson says, “Well, you can
purchase 30 cases of hotdogs costing you $0.10 /hot dog, if you purchase 17 cases per week
for the next 10 weeks at $.15/hotdog. “
1. How many hotdogs does Henry normally sell during the period of the contract?
Current week: 10 cases
Next 10 weeks: 10 x 10 = 100 cases
Total Contract: 10 + 100 = 110 = 110 cases
110 cases × 180 hotdogs/case = 19,800 hotdogs
2. What is the total cost of the hotdog inventory for the period?
19,800 hot dogs × $.35/hot dog = $6,930
3. How many hotdogs will Henry need to purchase under the new vendor contract?
30 cases + (17 cases × 10 weeks) = 200 cases
200 cases × 180 hotdogs/case = 36,000 hotdogs
4. What is the total cost of this inventory?
30 cases × 180 hotdogs/case × $.10/hot dog = $540
10 weeks × 17 cases ×180 hotdogs/case × $.15/hot dog = $ 4,590
$540 + $4,590 = $ 5,130
5. What is the average cost of a hotdog under this deal? (Round to the nearest cent.)
$5,130 ÷ 36,000 hot dogs = $.14 per hotdog
6. What is the percent savings per hotdog under the new deal?
($.35 - $.14) ÷ $.35 = .60 = 60% savings
7. What is the cost savings in total, if Henry accepts the new vendor deal rather than buying
the same amount of hotdogs at his current vendor price?
36,000 hot dogs × $.35/hot dog = $ 12,600
$12,600 − $5,130 = $7,470 savings
8. If hotdog sales remain stable at 10 cases per week during this period, how many hotdogs will
Henry have remaining in inventory at the end of 10 weeks?
36,000 hot dogs – 19,800 hot dogs = 16,200 hotdogs
9. If hotdog sales remain stable at 10 cases per week into the future, how many weeks will it
take to sell the remaining hotdogs? (Round to the nearest week.)
16,200 hotdogs ÷180 hotdogs/case = 90 cases
90 cases ÷ 10 cases/weeks = 9 weeks
10. If Henry can figure out a way to sell 13 cases a week, how many weeks will it take to sell the
new vendor order? (Round to the nearest week.)
30 cases + 17cases/week *10 weeks = 200 cases
200 cases ÷ 13 cases/week = 15.38 weeks or 16 weeks