What will happen to sw total operational costs


Question: Sam's Wine (SW) is a wine importer from France. It faces a high fixed cost for each shipment it brings into the United States, so it carefully balances its fixed ordering cost with its holding costs when placing an order, thus currently ordering four times a year. The demand in the United States is not changing much and can be considered deterministic. A French winery from the Rhone-Alpes region has approached the CEO of Sam's Wine - Sam with an offer. It has offered to pay half of SW's fixed cost per order if SW orders from them eight times instead of the current four times a year. What will happen to SW's total operational (ordering and holding) costs?

 

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