As a fund-raiser, the pep band at Melrose University sells T-shirts fans can wear when attending the school’s 12 home basketball games. As the band’s business manager, you must choose among several options for ordering and selling the T-shirts.
1. Place a single order in October large enough to last the entire season. The band must pay for the shirts in full when the order is placed. A 5 percent quantity discount applies lo this option.
2. Place a series of small orders, as needed, throughout the season. Again, payment in full is due when the order is submitted. No discount applies to this option.
3. Have band members sell shirts directly to members of the student body. Cash is collected immediately as sales are made.
4. Sell all of the T-shirts through the university bookstore. The bookstore would receive a 6 percent commission on total sales and would remit to the band its share of the proceeds in a lump-sum payment at the end of the season.
a. Describe which combination of options would give the pep band the shortest operating cycle.
b. Describe which combination of options would give the pep band the longest operating cycle.
c. Discuss briefly the advantages and disadvantages of each option.
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