Question

The pottery class buys clay for $8 and sells the clay for $17 during the day. At the end of the day, any leftover clay is sold to the pottery students for $5. What is the difference between the underage cost and overage cost? Answer to the nearest whole number.

Answer 1

The difference between the underage cost and the overage cost is $12

Step-by-step explanation:

The underage cost is the cost incurred per unit of unmet demand

So the underage cost = 5-8 = -$3

The overage cost is the cost incurred due to unused inventory = 17-8 = $9

So the difference between the underage and overage cost is = 9 -(-3) = $12