Just_ Baked_Assignment   Old Dominion University SCI MISC

Just Baked – Assignment Solutions
1. Best Service Level at each Just Baked store.
a. Cost of Understocking Cu. Compute the understocking cost Cu for franchisees and for
company owned stores.
Sol:
For Franchise: The understocking cost Cu is equal to the difference between their cost
of $1.25 and the selling price of $2.75
Cu = $ 2.75 - $ 1.25
= $ 1.50
For company-owned stores: The understocking cost Cu is equal to the difference
between their variable cost of $0.50 and the selling price of $2.75.
Cu = $ 2.75 - $ 0.50
= $ 2.25
b. Cost of Overstocking Co. Compute the overstocking cost Co for franchisees and for
company owned stores.
For Franchise: Difference between the price they pay and the credit from JB corporate
Co = $ 1.25 - $ 0.75
= $ 0.50
For company-owned stores: Only the JB variable cost
Co = $0.50